Not everyone backs Draghi’s stimulus plans
November 25, 2014, 6:44 pm

The European Central Bank appears to have taken its last measures to kickstart the stalled eurozone economy. The next step could likely be a significant quantitative easing scheme [Xinhua]

Senior ECB executives may be at odds over the level of stimulus – or quantitative easing – to introduce in financial markets.

On Monday, senior European banking executives contradicted ECB resident Mario Draghi’s comments that the central bank would step in and introduce additional measures if current efforts to raise inflation rates and encourage lending fail.

Current efforts include keeping interest rates at 0.05 per cent and maintaining current deposit rates to below zero at -0.2 per cent.

This would mean that banks that hold money overnight at the central bank would have to pay for the service; it would be in their benefit to encourage lending.

European analysts, however, say that ECB initiatives this summer have failed to increase the inflation rate – a critical marker of an economy’s health.

Recent data has the average inflation rate among the 18-nation eurozone at 0.5 per cent in the period up to October 2014, and the ECB says that low inflation – or deflation – can postpone growth as consumers wait for bargain prices for goods and services.

Draghi recently said: “It is essential to bring back inflation to target and without delay”.

He said that the ECB should “step up the pressure and broaden even more the channels through which we intervene”.

But both Ewald Nowotny, Austrian Central Bank chief, and German central bank President Jens Weidmann believed that no quantitative easing is needed in the Eurozone at this time.

They both echoed previous calls that more time be allowed for current corrective measures launched by the ECB before other initiatives are considered.

They also minimized the effect that 0.5 per cent inflation would have on European markets.