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ECB stimulus gains traction, ready to do more if needed: Draghi
[FRANKFURT] The European Central Bank's stimulus is gaining traction, but should it turn out that its current efforts are not sufficient to accelerate the eurozone recovery, the ECB is ready to do more, ECB President Mario Draghi said.
Mr Draghi said on Monday eurozone growth momentum had weakened over the summer, but the ECB's policy steps and eurozone countries' reforms should still lead to a moderate recovery next year and in 2016.
"We see early indications that our credit easing package is delivering tangible benefits," Mr Draghi told lawmakers in the European Parliament, adding that more time was needed for the latest measures to unfold.
The ECB is pumping more money into the banking system to unblock lending to households and companies by offering banks new long-term loans and by buying securitised private debt off their balance sheets.
Mr Draghi said the "credit trough seems to be behind us". ECB chief economist Peter Praet made similar comments earlier on Monday in London, saying there were faint signs that eurozone credit dynamics had reached a turning point.
But the overall picture remains bleak.
The eurozone economy has been mired in slow growth and weak inflation for months as governments implement reforms to make their economies more competitive and lighten their debt burden.
Eurozone annual inflation has been in what Mr Draghi has called "the danger zone" of below one per cent for a year, reaching 0.4 per cent in October, far below its medium-term target of just below 2 per cent. Such low price pressures concern the ECB.
"We need to remain alert to possible downside risks to our outlook for inflation, in particular against the background of a weakening growth momentum and continued subdued monetary and credit dynamics," Mr Draghi said.
He reiterated the ECB was ready to do more if inflation remained too low for too long, saying ECB staff was preparing the ground for further steps should they become necessary, and such new measures could include purchases of sovereign bonds.
Printing money to buy sovereign debt, however, a step known as quantitative easing, faces stiff opposition from Germany.