ECB will re-examine QE in December, Draghi says

The European Central Bank will re-examine its asset-purchase programme in December, President Mario Draghi said on Thursday.

Draghi reiterated that the ECB was monitoring risks to the economy and would consider extending the monthly €60bn quantitative easing programme past the planned 2016 September if needed.

The president noted that falling commodity prices and concerns about emerging markets meant inflation pressures remained negative.

“We have tasked relevant committees to work on different monetary policies to monitor pros and cons of different instruments," he told journalists at a press conference following the ECB’s announcement that it would keep policy unchanged.

"There was a very rich discussion about all monetary instruments that might be used... and the conclusion was: we are ready to act if needed."

He added that the asset purchase plans are "proceeding smoothly and continue to have a favourable impact" and that policy measures going forward were not a case of “wait and see but a work and assess”.

Draghi also revealed that the ECB had discussed furthering lowering the deposit rate, which sent the euro below $1.12 for the first time since early October.

Although Draghi said there was "no specific preference to one instrument or the other, they were all considered".

Ultimately the ECB decided to maintain interest rates, the deposit facility and the marginal lending facility unchanged at 0.05%, -0.20% and 0.30%, respectively.

Asked about the impact of the Chinese economic slowdown, Draghi noted it potentially poses risks to exports. He said 6% of Eurozone exports go to the nation. In Germany, it is even higher at 10%. He said there is also an indirect impact on oil and commodity prices.

The president again stressed that Eurozone governments needed to enact their own fiscal policies to boost recovery.

"Monetary policy should not be the only game in town. All countries should strive for growth-friendly fiscal policies.”

Cebr sees three potential forms that additional QE could take, according to senior economist Danae Kyriakopoulou.

Kyriakopoulou said the ECB could choose to extend the duration of the programme, increase the value of monthly purchases from €60bn or expand its list of eligible assets.

"...A key question is whether Greece will be included in the programme for example".

The ECB could also expand QE indirectly, through cutting the deposit rate further, the analyst added.

"At this stage, all these options remain open and whether the bank moves in a loosening direction is itself not a certainty. A chief obstacle is the divided environment in the Council, and building consensus is an external factor to economic forecasting. Only time will tell QE sera, sera – whatever QE QE."