ECB's Draghi: 'Significant' Accommodation Still Warranted

By Karen Mracek

     JACKSON HOLE, Wyoming (MNI) - European Central Bank President Mario Draghi

said Friday that while monetary policy makers are gaining confidence inflation

will return to its objective in the medium term, the ECB is not in a hurry to

remove accommodation.

     "We see the recovery is proceeding," Draghi said while answering questions

following prepared remarks at the Kansas City Fed's annual economic symposium.

     "So on one hand we are confident that as the output gap closes, inflation

will continue converging on its objective over the medium term," he continued.

"On the other, we have to be very patient because the labor market factors that

are slowing down and the low productivity are not factors that are going to

disappear anytime soon."

     Therefore, Draghi said, "a significant degree of monetary accommodation is

still warranted". 

     Draghi, who spoke in his prepared remarks about the need for global trade

openness and warned against financial deregulation, was asked about how he felt

the plan that he laid out at the same conference three years ago was proceeding.

"Very well," he answered.

     Elaborating, Draghi said "The experience has been very successful because

the recovery has taken ground." He did add thought that Europe is at "a stage of

consolidation that is not as progressed as it is in the United States. But it's

gaining ground."

     Still, Draghi said policymakers had yet to see "self sustaining convergence

on inflation towards the medium term objective because there are several factors

that are slowing this process."

     Mostly, he said, "these factors have to do with the labor market and the

lowness with which nominal wages will react to the closing of the gap."

--MNI Washington Bureau;tel: +1 202 371-2121; email: karen.mracek@marketnews.com

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