European Central Bank president urges spending to boost growth

The European Central Bank at its policy meeting on Thursday decided to leave its €1.7 trillion ($1.9 trillion) stimulus unchanged and asked governments of ECB member nations, especially Germany, to boost growth through spending.

The ECB, however, brushed off concerns over economic shock waves from Britain's vote to leave the European Union.

At Thursday's meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00 per cent, 0.25 per cent and -0.40 per cent respectively.

The Governing Council said it expects the key ECB interest rates to remain at present or lower levels for an extended period of time, and well past the horizon of the net asset purchases.

Regarding non-standard monetary policy measures, the Governing Council confirmed that the monthly asset purchases of €80 billion will run until the end of March 2017, or beyond, if necessary, and in any case until it sees a sustained adjustment in the path of inflation consistent with its inflation aim.

At a news conference later, ECB president Mario Draghi said he was concerned about persistently low eurozone inflation, which has fallen short of the ECB's near-2 per cent target for more than three years. Fresh ECB forecasts, published Thursday, showed inflation rising very gradually, to 1.2 per cent next year and 1.6 per cent in 2018.

Draghi said ECB did not consider fresh stimulus, saying the bank's existing policy measures, which include negative interest rates and €80 billion a month of bond purchases, are effective measures.

He also aimed an unusually direct rebuke at Germany, criticising Berlin for not boosting spending to support the economy. ''Countries that have fiscal space should use it,'' Mr. Draghi said. ''Germany has fiscal space.''

Draghi is due to visit Berlin later this month to address German lawmakers, amid criticism of the ECB's easy-money policies in Europe's largest economy.

Following the ECB's policy announcement, the Euro Stoxx 50 index fell almost 2 per cent before rebounding. The euro rose 0.5 per cent against the US dollar before falling back. The yield on 10-year German government bonds edged up to minus 0.093 per cent, then retreated.