Mario Draghi, president of the European Central Bank, has helped calm jittery financial markets by saying he would not hesitate to take fresh action to boost eurozone growth and inflation.
Stock markets across Europe, which were already rallying after a turbulent start to 2016, ended the day sharply higher in the belief Draghi would deliver on his pledge at the ECB meeting next month.
Financial markets believe Draghi will respond to fears of deflation and volatile share prices by pushing interest rates into negative territory and expanding the ECB’s quantitative easing programme.
Draghi dropped the broadest of hints in testimony to the European parliament that further stimulus was imminent. “The ECB is ready to do its part,” he said, adding that the bank was looking at the low level of inflation and whether enough money was getting through from the banks to the eurozone economy.
“If either of these two factors entail downward risks to price stability, we will not hesitate to act,” Draghi said.
He was speaking after the Chinese stock market opened for the first time in five days, during which global financial markets were rocked by fears of a rerun of the 2008 banking crisis. It held steady, helped by a 7% increased in Japan’s Nikkei 225, which posted its second-biggest one-day gain in three years.
The rally in Japan was prompted by weaker than expected growth figures, which led to speculation that the Bank of Japan would also step in to shore up the economy.