The European Central Bank will do its part to support euro zone growth with ultra-easy monetary policy, but governments need to speed up reforms and, where possible, spend more, European Central Bank President Mario Draghi said on Friday.
The ECB has spent over a trillion dollars buying bonds in an effort to boost inflation, a key gauge of economic growth. But inflation rates remain just above zero and are not expected to reach the ECB target for at least two years.
Echoing comments by other senior ECB officials, Draghi reaffirmed the bank’s commitment to maintain its current policy of negative interest rates and aggressive bond purchases until euro zone inflation again reaches its target, a rate of close to but below.
“If warranted, we will act by using all the instruments available within our mandate,” Draghi told an International Monetary Fund committee. “The ECB will continue to play its part by delivering on its mandate.”
ECB Vice President Vitor Constancio and chief economist Peter Praet had already moved on Thursday to quash market speculation that the ECB would reduce its monthly asset purchases, which come to 80 billion euros ($89 billion) a month and are scheduled to last until at least March.
Draghi also emphasised the role of governments in supporting the euro zone’s economy, while respecting EU budget constraints.
“An ambitious and well-sequenced structural reform effort, in combination with a fiscal policy that supports growth, will enable the euro area economy to reap the full benefits of our monetary policy measures,” he said.
“However, full and consistent implementation of the Stability and Growth Pact over time and across countries remains crucial.”