The potential candidate for the next President of the European Central Bank gave strong suggestions today that interest rates should be raised. Current ECB Board member Mario Draghi and head of the Bank of Italy, gave a speech to the annual assembly of Italy’s central bank this morning.
He mentioned that monetary stability overrides any other policy and represents the ECB’s main contribution to economic growth. He believes that the ECB’s interest rate levels remain accommodating and the euro zone’s debt crisis cannot deflect the bank from its primary goal of delivering price stability.
“Neither the existence of sovereign risks nor some banks’ abnormal dependence on ECB financing can divert it from this objective,” Draghi said.
Referring to the current Eurozone debt crisis, he said the responsibility must lie primarily in national policies and the complete implementation of adjustment plans that have been agreed. He believes that even after last month’s interest rate hike to 1.25 percent, monetary conditions remain accommodating.
These hawkish comments by the ECB board member gave the markets optimism and boosted he Euro to new highs of 1.4422 at 0917GMT.
The Bank of Italy Chief is one of the leading candidates to take the helm of the ECB when Jean-Claude Trichet steps down in October. He is known for his hawkish comments even before last month’s ECB rate hike when he used to push forth his views on tighter monetary policy.