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European Central Bank (ECB) President Mario Draghi on Thursday launched the ECB new asset purchase plan, saying the central bank was ready to take further steps should low inflation become too prolonged in the eurozone.
The purchases will start with covered bonds in mid-October and asset-backed securities (ABS) in the fourth quarter of this year to try to inject more liquidity into the economy to stimulate growth, Draghi told a press conference following the ECB governing council meeting held in Italy's Naples.
The purchases will last for at least two years and, together with the targeted longer-term refinancing operations to be conducted until June 2016, will further enhance the functioning of the monetary policy transmission mechanism, facilitate credit provision to the broad economy and generate positive spillovers to other markets, Draghi said.
As all measures work their way through to the eurozone's economy, they will contribute to a return of inflation rates to levels closer to the ECB aim of maintaining inflation rates below, but close to, 2 percent, he added.
However, the ECB head also warned of the risk of continued low inflation across the eurozone in the medium and long-term. He stressed the ECB governing council was "unanimous in its commitment to using additional unconventional instruments within its mandate" in case it becomes necessary to further address risks of too prolonged a period of low inflation.
According to Eurostat's flash estimate, eurozone annual Harmonized Index of Consumer Prices (HICP) inflation was 0.3 percent in September, after 0.4 percent in August, and is expected to remain at low levels over the coming months, before increasing gradually during 2015 and 2016.
Draghi noted that the eurozone's real gross domestic product (GDP) has remained unchanged between the first and second quarter of 2014, while survey data available up to September have confirmed the weakening in the eurozone's growth momentum.
Looking ahead to 2015, he went on saying, the outlook for a moderate recovery remains in place, but "the main factors and assumptions shaping this assessment need to be monitored closely."
Also in the hope of stimulating the economy, the ECB governing council in Thursday's meeting agreed to leave the central bank's key interest rates unchanged at record lows. The main refinancing rate was kept at 0.05 percent and its deposit rate at minus 0.20 percent.
But as the central bank is doing its part to encourage growth in the eurozone, national governments in the meantime should "clearly accelerate" their work on strengthening investment activity and job creation and improving the business environment for firms, Draghi pointed out.
He warned that insufficient progress of structural reforms along with the faltering recovery and heightened geopolitical tensions "constitute a key downward risk to the economic outlook."
Meanwhile, member states "should not unravel the progress already made but proceed in line with the rules of the stability and growth pact, which should remain the anchor for confidence in sustainable public finances," he added.
The first ever session of the ECB council meeting in Naples triggered anti-austerity protests in the Italian southern city, one of the most hard hit by the country's third recession in six years.
Thousands of protesters took the streets shouting that crisis-plagued Italy cannot afford more demands fore austerity. Some of them threw firecrackers and smoke bombs, which forced authorities to tighten security measures and police to respond with water cannons.
