The sentiment improved today in the market after the European Central Bank president, Mario Draghi, started to speak at the ECB press conference, where the president reassured that the European Central Bank kept rates unchanged at 1% in order to support the euro-area economy and as the Bank expects inflation to return below the 2% over the medium-term.
Regarding inflation, Draghi said that inflation is to remain above the 2% target for several months; however, over the medium-term inflation is projected to retreat below the 2% target. Regarding growth, the president said the he no longer sees substantial downside economic risks, clarifying that he sees tentative signs of stabilization.
Moreover, Draghi said the real gross domestic product figures were very weak in the fourth quarter; however, stress in financial markets diminished and now some positive signs are seen in the region.
All governments must stick to fiscal targets for 2012 since the euro zone attempts to overcome the debt crisis. In addition, Draghi declined to comment on the Greek haircuts; however, he confirmed that the Greek party leaders have reached an agreement and now he cannot say what the ECB can do until after the euro group is finished late today, yet he confirmed that talks about the ECB taking losses are unfounded.
Draghi reassured that the non-standard measures are temporary in nature, adding that the ECB will take more risk, which will be managed perfectly, after the Bank decided to change collateral to include credit claims; however, the conditions on collateral will be very stringent.
Draghi also said that long-term refinancing operations provided in December relieved markets and provided essential liquidity to the market, where some banks used those loans in order to refund their own bonds. In addition, the president said that the second round of LTRO should be similar to the first one.