The Latest: ECB chief sees potential turmoil from elections

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Posted: Dec 08, 2016 9:23 AM
The Latest: ECB chief sees potential turmoil from elections

FRANKFURT, Germany (AP) — The Latest on the European Central Bank's policy meeting (all times local):

3:20 p.m.

European Central Bank President Mario Draghi says the eurozone could face turbulence from elections next year and that it's the central bank's role "to keep a steady hand" supporting the economy.

Draghi said that "uncertainty prevails everywhere," adding: "just look at the election calendar for next year."

Next year could see a strong showing by anti-immigration politician Geert Wilders and his Party For Freedom in the Netherlands in March. In France, National Front leader Marine Le Pen is expected to make it past the first round of presidential voting in April. She wants France to leave the EU and the euro.

The ECB on Thursday announced it would continue its bond-buying stimulus program at least through December, instead of March. The purchases would continue at a lower rate of 60 billion euros instead of 80 billion euros.

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3:00 p.m.

European Central Bank President Mario Draghi says there's no question of tapering off the bank's bond-purchase stimulus program despite its decision to reduce the monthly purchase amount.

Draghi spoke after the bank reduced the monthly amount of its bond purchases — meant to stimulate the economy — to 60 billion euros ($64 billion) from 80 billion euros. It extended the program, however, for nine months rather than the expected six months.

The program's earliest end date was pushed back to December 2017 from March, and it would in any case continue until annual inflation turns up toward the bank's goal of just under 2 percent. Right now it's a weak 0.6 percent.

Draghi told at a news conference that there was "no question about tapering. Tapering has not been discussed today."

He said the 60 billion euros could be increased "to the extent necessary" so that the bank's council could respond "in a pragmatic and flexible way to cope with risks that may materialize."

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2:40 p.m.

European Central Bank President Mario Draghi says the decision to extend the duration of the bank's bond-buying stimulus program will help keep substantial support for the economy — despite reducing the monthly amount of bond bought to 60 billion euros ($64 billion) from 80 billion euros.

Draghi says that Thursday's decision "ensures financial conditions in the euro area will remain very favorable."

He says that extending the stimulus program by nine months — rather than the expected six — means "a more sustained market presence and therefore a more lasting transmission of our stimulus.

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2:30 p.m.

Analysts say that the ECB's move Thursday to extend its stimulus program at a reduced rate could be take as the first sign that the program is being "tapered," or gradually wound down.

Though the program was extended by nine months, the monthly amount of bonds it will buy as part of its stimulus will after March be reduced to 60 billion euros ($64 billion) from 80 billion euros.

Jennifer McKeown, chief European economist at Capital Economics, says the announcement is "slightly disappointing." She says it's possible that the ECB could have to increase the pace of the bond buying once again.

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2:15 p.m.

The euro is volatile after the European Central Bank said it would extend the duration of its bond-buying stimulus program by nine months, but at a reduced pace.

The common currency used by 19 countries initially jumped on the announcement but soon lost all those gains to trade almost 0.1 percent lower against the dollar, at $1.0757.

Bond-buying stimulus of the kind the ECB is engaged in tends to weaken a currency. The Fed, on the other hand, is looking to raise its key interest rate later this month, a move that has strengthened the dollar in recent months.

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1:45 p.m.

The European Central Bank has decided to extend its bond-buying stimulus program by another nine months to support the economy amid increasing turbulence from populist politics.

The chief monetary authority for the 19 countries that use the euro said Thursday that after March it would keep buying bonds, but at a reduced rate of 60 billion euros ($64 billion) a month. Currently, it is buying 80 billion euros per month through March.

That adds at least 540 billion euros in stimulus to the existing 1.74 billion ($1.87 trillion) effort.

The ECB purchases, which have been running since March, 2015, pump freshly created money into the banking system in hopes of increasing weak inflation and boosting growth. The move also helps keep markets calmer as Europe faces elections in the Netherlands and France next year where anti-EU, populist candidates are expected to do well.