The European Central Bank left its interest rate target unchanged at 0.75% in its latest monetary policy decision this morning, surprising no one. ECB President Mario Draghi also gave few new details about the central bank’s new bond-buying program, though stressed that all European leaders would need to take action to avert the risk of “renewed intensification of financial market tensions” in the future.
The ECB has been the strongest leader in the effort to stabilize the euro area economy, and policies announced last month were the latest installment in this effort. Draghi promised the bank would undertake outright monetary transactions (OMT) if necessary—essentially, a fancy way of saying that the bank would purchase an unlimited quantity of European countries’ sovereign bonds, so long as those governments were on an aid program.
At the press conference following the decision, the central bank president stressed the need to hold countries receiving aid from the ECB to strict conditions, saying that the ECB would not purchase the bonds of countries with an ambiguous financial standing. He also said that countries would need “complete market access” in order for the ECB to implement the OMT program.
Draghi told reporters that there was no discussion of interest rate cuts in the short term. Many analysts argue that some businesses might benefit from looser monetary policy and inflation. However, the bank is governed by a single mandate—price stability—and inflation is currently well above its target of just under 2%. Prices rose at an annualized rate of 2.7% in September.