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ECB’s Draghi leaves door open for further rate cuts

FXstreet.com (Barcelona) - The ECB Governing Council decided to cut the main interest rate by 25 basis points to 0.5% at their May monetary policy meeting. During the subsequent press conference the ECB head Mario Draghi assured that the ECB “stands ready to act” should a need for further rate cuts arise.

The president said that the weakness in the Eurozone economy extended into spring and that the rate cut was aimed at supporting the recovery which should start later in 2013. He remarked that labor market conditions were still very weak and that continuing uncertainty was weighing on the recovery.

As far as inflation is concerned, Mario Draghi said that its recent fall reflects the drop in energy prices, but is also “due to a sizeable transitory effect coming from the annual rate of change in services prices on account of the timing of Easter.” He suggested that inflation rates might be subject to volatility during the year.

Mario Draghi assured that the central bank would continue with its accommodative monetary policy for as long as needed. He also informed that the ECB would conduct “consultations with other European institutions on initiatives to promote a functioning market for asset-backed securities collateralised by loans to non-financial corporations.”

The ECB head urged the EU Member States to carry on with structural reforms in order to stimulate competitiveness and employment and reduce deficits. Finally, he stressed the need for a quick implementation of the banking union.

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