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  ECB monetary policy

  10 Debates

The ECB will stick to its loose monetary policy for the time being, maintaining the benchmark interest rate at its record low of zero percent and leaving open the possibility of extending the bond-buying programme. ECB head Draghi justified the decision pointing to the euro's fluctuating exchange rate. Has the time for higher interest rates come?

Leading central bankers and economists from around the world are convening this week at their AGM at Jackson Hole in the US. Many of them are unsure whether to stick to the path of low interest rates and multi-billion programmes to buy up government bonds. Commentators have their own demands to make to the monetary policy makers.

ECB chief Mario Draghi has made it clear that the ECB has no intention of lowering interest rates even further after years of an expansive monetary policy. The benchmark interest rate will, however, be left at its current level of zero percent for the time being. Some commentators criticise the central bank's lack of resolve. Others say its cautious approach makes sense.

Inflation in the Eurozone rose considerably in December. The EU's statistical office Eurostat announced on Wednesday that consumer prices were 1.7 percent higher than a year ago. This is the highest rate of inflation since September 2013, prompting some journalists to call for an end to the ECB's expansive monetary policy. Others say such a move would have disastrous consequences.

ECB chief Mario Draghi announced on Thursday that the bond buying programme will be continued until at least the end of 2017. From April, however, it will be scaled down to 60 instead of 80 billion euros per month. Draghi is gradually turning off the cheap money supply and Italy in particular needs to take action, commentators warn. Others say the bond buying programme won't end any time soon because Europe's stability is at stake.

Mario Draghi has countered criticism of his zero interest rate policy from Germany saying he must preserve price stability for the whole of the Eurozone and not only for Germany. At the same time he announced that the benchmark interest rate would be left at its current historic low. Are Berlin's complaints justified or is it overstepping the mark?

Criticism of the ECB's zero interest rate policy is growing louder. Finance Minister Wolfgang Schäuble said on the weekend that the loose monetary policy was contributing to the growing popularity of the national-conservative AfD party in Germany. The press discusses the accusation and the effectiveness of the relaxed monetary policy.

The ECB's Governing Council is widely expected to unveil a large-scale plan for the purchase of government bonds at its meeting today, Thursday. The decision could further divide the Eurozone if the crisis states abandon austerity and prompt rich countries to end their solidarity, some commentators fear. Others see the plan as an important step towards pulling debt-ridden countries out of their financial misery.

Share prices soared on Thursday in reaction to the ECB's announcement that it will launch a multi-billion euro bond-buying programme. Meanwhile the euro dropped below 1.14 against the dollar. This trend will help the export trade, some commentators write jubilantly. Others see the Eurozone on its last legs now that the ECB has been forced to resort to the only instrument left at its disposal.

The ECB announced on Thursday that it would prolong its controversial bond-buying programme until March 2017. Because investors had expected an increase in the volume of monthly purchases, stock markets around the world slumped on Thursday. But the investors' disappointment is unjustified, commentators write, and doubt that Europe's economy can be saved with additional money.