FRANKFURT: The European Central Bank’s (ECB) governing council is united in its determination to achieve the bank’s mandate of keeping inflation just below 2%, ECB President Mario Draghi said that the bank is poised to launch a government bond purchase program when it meets next week.
Draghi recounted experiences from his teenage years as a young head of household when inflation wiped out his family’s savings after his parents died. He even noted a phase when his hair was quite long.
Draghi is not running sufficiently conservative monetary policies, days before the ECB is expected to launch purchases of government bonds ranging from powerful Germany to more fragile economies such as Spain and Italy.
The policy, known as quantitative easing (QE), is deeply unpopular in Germany where it stirs long-standing fears of inflation. The ECB meets on January 22.
Draghi recalled how 20% inflation rates in Italy during the 1970s made money that had been set aside for his and his siblings’ education disappear into thin air.
Draghi said that while the risk of persistent falls in consumer prices, known as deflation, remains low, the risk is definitely higher than it was a year ago. The drop in expectations of future inflation, he said, is actually astonishing. Consumer prices in the euro zone fell 0.2% in December from a year earlier.
Further Draghi said that there remain differences within the ECB’s 25 person governing council on how best to achieve the bank’s 2% inflation target.