The European Central Bank (ECB) held its rate unchanged on Thursday, despite pressure for further easing, but Draghi pledged the bank will intervene in the markets in the wake of “exceptionally high risk premia” for several countries’ bonds.
“Exceptionally high risk premia are observed in government bond prices in several countries,” Draghi told a news conference.
“Governments must stand ready to activate the EFSF, the ESM in the bond markets under necessary conditions,” he said, referring to the eurozone’s two bailout funds.
“The Governing Council, within its mandate to maintain price stability over medium term and... may undertake outright, open-market operations of a size adequate to reach its objectives,” Draghi added.
Over the coming weeks, the ECB will discuss what other non-standard monetary policy measures it can undertake to “repair monetary policy transmission,” Draghi said.
Global stocks fell and the euro erased earlier gains against the dollar on disappointment that Draghi did not announce more concrete steps on dealing with the worsening eurozone crisis.
He urged policymakers in the eurozone countries to “push ahead” with fiscal consolidation, structural reform and building the European institutions needed for more integration and repeated the central bank’s commitment to defend the single currency.
“The euro is irreversible,” Draghi said.
On macroeconomic issues, he said inflation was on a downward course but economic growth in the eurozone remains weak.
“As we said a month ago, inflation should decline further in the course of 2012 and be below 2 percent again in 2013,” Draghi said.
On Wednesday, the Federal Reserve refrained from announcing more quantitative easing measuresalthough Fed Chairman Ben Bernanke hinted that more easing will come if economic conditions worsen.
The eurozone debt crisis has been hurting emerging markets, with China’s weak manufacturingfigure among the most recent signs of a slowdown.
Late last month, the European Bank for Reconstruction and Development (EBRD) cut growth forecasts for its countries of operation as the eurozone crisis spread.
Assets in emerging markets got a boost over the past week as the risk-on trade seemed to be back following Draghi’s remark last Thursday that he would do “whatever it takes” to save the euro.