Published On: Fri, Sep 8th, 2017

'No risk' Draghi hits back at critics of ECB's huge money-printing programme

The European Central Bank (ECB) this week raised the bloc’s growth forecast to 2.2 from 1.9 per cent in 2017, and to 1.8 per cent from 1.7 per cent in 2019, suggesting there will be less need for monetary support.

But at the same time, the ECB chief Mr Draghi in effect said monetary policy is necessary for the economic recovery.

Across the eurozone there are huge differences in the performances of member states.

Italy, Portugal and Spain are still below levels seen before the crisis in 2008.

And it is feared there could be further economic losses due amid Brexit.

The higher euro is also a concern for the bloc’s economy, amid concerns exports and inflation could fall.

Mr Draghi this week admitted the exchange rate is being monitored and is a source of uncertainty.

However, the ECB chief did not seem overly concerned, giving markets the green light to push the euro higher.

Against this background, the policymakers are in no hurry to make changes to the money printing programme.

Therefore, it seems the return to ‘normal’ monetary policy is still some way off.

This is likely to disappoint German finance minister Wolfgang Schaeuble, who has long called for the end of the so-called Quantitative Easing (QE) programme.

This week he said: “Unusual monetary policy implies it is not usual or normal — we should get back to a normal monetary policy.

“We have come back to a normal situation much quicker than people thought.”

Deutsche Bank chief executive John Cryan has also called for an end to cheap money, which he suggested is ceasing dangerous asset bubbles.

He recently said: “The era of cheap money in Europe should come to an end – despite the strong euro.

“We are now seeing signs of bubbles in more and more parts of the capital market.”

However, Mr Draghi has reiterated that there is no systematic risks from the programme.

He told a press conference this week there is “no bubble” being created by asset purchasing.

Printing money, through snapping up Government bonds is, therefore, likely to continue well into 2018.

It is thought that German bonds available for the ECB could run out, with the ECB turning tolerative states such as Italy for purchases.

This would push down borrowing costs for Rome, distorting pricing risks across the eurozone.

It is feared this could make an exit from the money printing programme even more difficult in the future.

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