Analyzing the Dr. Mario Draghi Mind...

Mario Draghi: Interview in Die Zeit (German weekly newspaper) published 15 January 2015 

"...central bank policy is not about punishing German savers, and it is not about rewarding weak countries. The European Central Bank's mandate is to achieve an inflation rate of just below 2% for the euro area as a whole. To fulfil that at this time, it must keep interest rates low and must work towards an expansionary monetary policy which accompanies growth. That's the point, not punishment or rewards. But sometimes it is hard to explain this to everyone in Germany, including in discussions with some politicians..."

" In Japan there wasn't this 2% objective, and in the 1990s prices began to fall. The problem was not that prices were falling, but that people thought that they would never rise again, they would keep falling further and further. So they stopped buying things, because they thought they could get them even more cheaply at a later date. Production fell, so prices fell even further, and so the economy became slower and slower. We are not in that situation, yet."

"The average annual inflation rate expected during the course of the following year used to stand at around 1.77% in the past; in 2013 it stood at 1.08% and now it is only 0.37%."

. .."In the past, the average inflation expected for the next five years was 2.31% and today it stands at 1.68%. Looking at a ten-year period, it stood at 2.09% in the past and today it stands at 1.15%. That's how it goes!"

"from a central banker's perspective, inflation is easier to tackle than deflation. Why? When there is inflation, you raise the interest rates. In this way, the price of money increases, the volume of cash in the economy shrinks and the pressure on prices and wages recedes. With deflation it is harder. We are now in a situation in which we should reduce the interest rate further, but that is no longer possible. At this point, we need to take recourse to unconventional measures, meaning we need to change the size and the composition of the European Central Bank's balance sheet"...


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