–Refuses To Speculate On Future Rate Path
–Discusses What An Unacceptable Level Of Financial Fragmentation Is
–Comments On Criteria The ECB Will Use In Implementing OMT

LONDON (MNI) – The European Central Bank’s Governing Council did
not discuss changes in interest rates at its policy meeting today,
President Mario Draghi said today.

“There was no discussion, so in a sense it was a unanimous decision
about interest rates,” Draghi said.

He dismissed a question about the future path of rate policy,
saying “we don’t speculate on future changes in interest rates really.

The ECB chief suggested there was more of a priority now being put
on non-standard policies because the ECB’s policy rates are not being
transmitted smoothly throughout the Eurozone.

“Non-standard monetary policy measures are being designed and
implemented when the standard ones are not fully effective, otherwise we
would stay with the standard monetary policy measures,” he said.

“We have to see if we can repair the monetary policy transmission
channels,” Draghi added. “The rate of change in prices is in line with
medium-term price stability according to our definition. That is the
assessment we made about the interest rate…As I said there was no
discussion (of lowering interest rates).”

Draghi said “it was hard to say” how to define what an acceptable
level of financial fragmentation would be. “The level of fragmentation
becomes unacceptable when the singleness of monetary policy in the euro
area is being put into question,” he said.

When two subsidiaries of the same company in different companies
pay completely different rates to borrow, or couples in one country have
a much higher mortgage than in another country, “then you start asking
yourself if maybe there is a problem here,” Draghi said.

He noted that while credit flows are normal in one part of the euro
area, they are “non-existent in other parts,” and there is “widespread
credit rationing.” He noted that big spreads between EMU states reflect
a “profound lack of liquidity in some markets,” and that under the
current crisis circumstances, “the exchange rate appreciates when the
interest rates go down and vice versa.” At that point, “you say you have
a possible unacceptable level of fragmentation in the euro area.”

Draghi was also asked what criteria the ECB would deploy when
deciding if its bond-purchasing program was needed to rectify monetary
policy transmission. The ECB chief said an array of market indicators
would need to be interpreted:

“We are considering a variety of indicators here, one of which is
the interest rates but then we also consider, as I said before the
bid/ask spreads, the liquidity, the shape of the yield curves, the
volatility, so there is a variety of indicators which will inform our
monetary policy assessment.”

Asked about recent public discussion regarding the possible
publication of minutes of the ECB’s policy meetings, Draghi said that
members of the bank’s Governing Council, including himself, were open to
it but that it was a “complex” issue.

“Clearly there have been statements by several governing council
members and by myself showing an open mind about this point, but it’s a
complex process and we are actually thinking about this – about how to
proceed,” he said.

He argued that the ECB was already transparent.

“There are pros and there are cons. What you have to keep in mind
is that the ECB is already a very transparent institution, just think
about this press conference every month.”

–London Bureau; Tel: +442078627492; email: ukeditorial@marketnews.com

[TOPICS: MT$$$$,MI$$$$,M$X$$$,M$$EC$,MGX$$$]