- Francois Villeroy De Galhau, ECB Governing Council member
The European Central Bank has tools and capacity to act further if needed, as inflation remains stubbornly below target, Governing Council member Francois Villeroy De Galhau said. In light of sluggish economic growth and persistently falling oil prices, ECB President Mario Draghi extended the central bank's programme of asset purchases through March 2017 and lowered deposit rate to minus 0.3%. Yet, investors were disappointed with the scale of the stimulus package, and sent the common currency surging. The Euro zone consumer inflation was 0.2% higher in December compared with a year ago, remaining well below policy makers' 2% target. Villeroy said that ECB stimulus will add about a half a percentage point to inflation this year and almost the same to growth. The ECB currently estimates consumer prices will climb 1% in 2016 after virtually stagnation in 2015. Meanwhile, Josef Bonnici, the Governor of the Central Bank of Malta, said the ECB must continuously assess the effect of the bond-buying programme, adding that while the declining oil prices lifted buying power of Euro zone households, it hurt price growth.
The ECB's Governing Council gathers in Frankfurt next week for its first policy-making meeting this year. President Mario Draghi will hold a press conference to voice the council's thinking on January 21.
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