5th September 2014

Economic Policy: ECB tries to tackle low inflation and growth, indicates important financial institutions

At the meeting of the ECB Governing Council on Thursday 4 September, the eurozone´s central bank took an expected step and announced bond-buying program in an effort to reverse the low inflation and growth prospects. Eurozone´s growth reached only 0.2% in the first half of 2014 and the inflation rests far below the ECB´s 2% target – it reached only 0.3%. Starting in October, the central bank will start to buy debt products from commercial banks. This should provide credit incentive and foster growth of GDP and of inflation. Also, the continuation of the cheap loans providing program was announced. Together with these unconventional measures, the Governing Council of the bank decreased its main refinancing interest rate to a new record low of 0.05%. The deposit facility interest rate was also lowered to -0.20%. Mario Draghi, President of the ECB, indicated that not all the decisions were consensual, although a comfortable majority was found. He also called on eurozone governments to proceed with structural reforms. He stressed, that politicians cannot rely on the central bank to provide for growth. Reforms and fiscal measures are also needed, both of which lie in the hands of national politicians.

Members of the American Chamber of Commerce in the Czech Republic