European Central Bank (ECB) head Mario Draghi insisted on Thursday that the bank’s massive stimulus efforts are still needed even though the 19-country Eurozone’s economy is strengthening.
“The recovery is progressing and now may be gaining momentum,” Draghi said in a speech at a conference at Frankfurt’s Goethe University.
He cautioned, however, that much of the improvement depended on the ECB’s monetary stimulus efforts and that it was “too soon to declare success”.
Draghi’s stance on keeping stimulus in place contrasts with that of the United States Federal Reserve, which has already started withdrawing monetary stimulus by raising benchmark interest rates off their lows near zero. Minutes of the Fed’s last meeting, released Wednesday, showed officials were considering reducing their large bond holdings sooner than expected, a step that could eventually mean higher market interest rates. The Fed can do that because the US economic recovery is farther along and unemployment has fallen to lower levels than in Europe.
The ECB has said it intends to continue its main stimulus program – which pushes newly printed money into the Eurozone economy through bond purchases – at least through the end of the year. It has also kept its key interest rate benchmark at a record low of zero. Both steps aim to raise inflation and increase credit to businesses so they can expand and hire people.
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