FRANKFURT: Markets have settled quickly after Italy's fractured election result and any threat of contagion has been muted, the European Central Bank's chief said on Thursday, suggesting it is in no rush to take any action.
Italians delivered a strong rejection of austerity measures at elections last week and left no party grouping with enough support to form a durable government, raising the prospect of backsliding on economic reforms and debt-cutting measures.
"Markets after some excitement immediately after the elections have now reverted back, more or less, to what they were before," Draghi told a news conference after the ECB held interest rates at a record low 0.75 percent.
"You have seen certainly that the contagion to other countries has been muted this time, contrary to what might have happened about a year and a half ago. And this is another positive sign," he said.
The ECB has calmed the euro zone crisis with its pledge to buy government bonds in potentially unlimited amounts but it will only do so if a member country seeks helps from the bloc's rescue fund and agrees to austerity policy conditions.
The programme, dubbed Outright Monetary Transactions (OMT), is yet to be deployed and Italy could find itself outside the ECB's umbrella if it cannot form a government prepared to adhere to its rules. "OMT remains, is in place," Draghi said.
"It is a very effective backstop, and it is there. But you know the rules." A Reuters poll of economists showed uncertainty stemming from Italy's election makes it more likely the ECB will have to help struggling countries by buying their bonds at some point but with Spain, not Italy, the most likely recipient.
Although the decision to keep rates on hold met analysts' expectations, a growing minority of respondents - 22 out of 76 expect that, eventually, the ECB will cut its main refinancing to a new record low of 0.5 percent.
The euro climbed to a session peak against the dollar after Draghi gave no strong hint about monetary policy easing in the months ahead.
But there may have been a divergence of views on the central bank's Governing Council. "The prevailing consensus was to leave the rates unchanged," Draghi said. When decisions have been unanimous, he generally say so.
indiatimes.com
Italians delivered a strong rejection of austerity measures at elections last week and left no party grouping with enough support to form a durable government, raising the prospect of backsliding on economic reforms and debt-cutting measures.
"Markets after some excitement immediately after the elections have now reverted back, more or less, to what they were before," Draghi told a news conference after the ECB held interest rates at a record low 0.75 percent.
"You have seen certainly that the contagion to other countries has been muted this time, contrary to what might have happened about a year and a half ago. And this is another positive sign," he said.
The ECB has calmed the euro zone crisis with its pledge to buy government bonds in potentially unlimited amounts but it will only do so if a member country seeks helps from the bloc's rescue fund and agrees to austerity policy conditions.
The programme, dubbed Outright Monetary Transactions (OMT), is yet to be deployed and Italy could find itself outside the ECB's umbrella if it cannot form a government prepared to adhere to its rules. "OMT remains, is in place," Draghi said.
"It is a very effective backstop, and it is there. But you know the rules." A Reuters poll of economists showed uncertainty stemming from Italy's election makes it more likely the ECB will have to help struggling countries by buying their bonds at some point but with Spain, not Italy, the most likely recipient.
Although the decision to keep rates on hold met analysts' expectations, a growing minority of respondents - 22 out of 76 expect that, eventually, the ECB will cut its main refinancing to a new record low of 0.5 percent.
The euro climbed to a session peak against the dollar after Draghi gave no strong hint about monetary policy easing in the months ahead.
But there may have been a divergence of views on the central bank's Governing Council. "The prevailing consensus was to leave the rates unchanged," Draghi said. When decisions have been unanimous, he generally say so.
indiatimes.com
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