Draghi said low interest rates were not punishing savers

Tuesday, Jan 26 2016

European Central Bank (ECB) boss Mario Draghi has hit back at critics of the bank's decisions to keep interest rates low and launch a €1.5 trillion (£1.1 trillion) asset purchase programme. Draghi, who last week hinted interest rates might be cut further, said low interest rates were not punishing savers. He said inflation adjusted returns did not tell this story and that a hike in interest rates would "simply push us back into recession and rates would stay lower for longer."

The former Bank of Italy chief also dismissed claims that low rates were fuelling speculation. He told an audience at Deutsche Borse Group in Frankfurt: "Financial crises are typically associated with strong credit growth and rising leverage in the banking system. What we see at the moment, however, is a nascent credit recovery and deleveraging among banks. In fact, coming out of a deep banking crisis, rapid credit growth would really be a 'luxury problem'!"

Draghi said that boosting growth using the ECB's monetary policy was not taking the pressure of European governments that need to reform their labour markets – another common criticism. "Spain started its labour market reforms when interest rates had already gone down. Italy passed a labour market reform last year in tranquil market conditions. Likewise, France is pursuing the Macron reforms with no market pressure," he said. "So if we look at these concerns together, we can see a common theme. While each contains a grain of truth, there’s another side to the story which isn’t receiving the same attention."

Euro is currently being traded around 1.0830 area. Pair is likely to find support around 1.0750 handle and resistance above 1.0880 level. There will be no major data releases in the rest of the session.

Source: City A.M

More in this category: « BoE Forbes: UK to Hike Rates When Wages Pick Up CB Consumer Confidence rose to 98.1 »