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The outgoing European Central Bank President Mario Draghi said on Monday that it is unlikely that the euro area economy will witness a rebound in the near future.
"Looking ahead, recent data and forward-looking indicators - such as new export orders in manufacturing - do not show convincing signs of a rebound in growth in the near future and the balance of risks to the growth outlook remains tilted to the downside," Draghi said at a hearing in the European Parliament in Brussels.
The ECB Chief said the likelihood of deflation in Eurozone remains limited. However, market expectations of inflation are settling around values that are not consistent with the ECB's aim of keeping inflation "below,but close to 2 percent", Draghi added.
"Overall, in view of the outlook and uncertainties we are facing, monetary policy needs to remain highly accommodative for a prolonged period of time," Draghi said.
Earlier this month, Draghi unveiled a stimulus package with several measures including a reduction in the deposit rate to -0.50 percent and a restart of asset purchases. The ECB stimulus also included a significant change in the wording of forward guidance on interest rates that removed the reference to any specific time period until which the bank expects rates to remain low.
That said, the bank continued to signal that interest rates can be lowered further. The ECB now wants the inflation convergence, to its near 2 percent target, to consistently reflect in underlying inflation trends to start considering tightening.
"It is crucial to remain vigilant and to use the available micro- and macroprudential policy tools as necessary," Draghi said. Former IMF Managing Director Christine Lagarde is set to replace Draghi as the ECB President when his term ends at the end of October. Eurozone interest rates were raised last in July 2011 by 25 basis points and Draghi will be the only ECB President thus far who did not raise rates during his tenure.
