Draghi Leaves Door Open for More ECB Action in September

In his first monetary policy announcement since the U.K. voted to leave the European Union, European Central Bank (ECB) President Mario Draghi indicated on Thursday that further action may be considered at the next meeting in September as the bank assesses the impact of Brexit on the eurozone’s economy.

The ECB reiterated its expectation that interest rates will remain at their current levels or lower for an extended period, well beyond the conclusion of its net asset purchases.

Draghi commented on the financial markets’ reaction to the uncertainty stemming from the U.K. referendum, noting an “encouraging resilience.”

Following a similar perspective expressed by other officials last week, Draghi explained that the ECB’s current inaction is due to the necessity of gathering more information to understand the broader impact of Brexit.

“In the coming months, with more information and updated staff projections, we will be better equipped to reassess macroeconomic conditions, inflation trajectories, and growth prospects,” he stated.

He acknowledged that the ECB continues to expect a moderate pace of economic recovery, though he recognized existing challenges, including not only the implications of Brexit but also geopolitical uncertainties, weak growth prospects in emerging markets, necessary balance sheet adjustments across various sectors, and the slow progress of structural reforms.

“Given this context, the risks to the euro area’s growth outlook are tilted to the downside,” Draghi observed.

Regarding price stability, he indicated that inflation is expected to remain very low for the next few months, but is likely to begin increasing later in 2016, with further growth anticipated in 2017 and 2018.

As always, Draghi urged governments to play a more decisive role both nationally and at the European level, emphasizing the importance of implementing structural reforms to reduce unemployment and bolster potential output growth within the eurozone.