Interest rates to stay at 'extraordinary' low levels, says Draghi

Mario Draghi told the European Parliament that the eurozone still needs

Interest rates have to stay at record low levels despite the resurgence in the eurozone economy because the upturn may not be sustainable, Mario Draghi told MEPs.

“Despite a firmer recovery, and looking through the volatile readings in HICP inflation over recent months, underlying inflation pressures have remained subdued. Domestic cost pressures, notably from wages, are still insufficient to support a durable and self-sustaining convergence of inflation toward our medium-term objective,” said the president of the European Central Bank.

“Overall, we remain firmly convinced that an extraordinary amount of monetary policy support, including through our forward guidance, is still necessary for the present level of underutilised resources to be re-absorbed and for inflation to return to and durably stabilise around levels close to 2pc within a meaningful medium-term horizon.”

A long-term economic recovery also needs structural reforms to boost investment and productivity growth, he said.

“In this context higher productivity growth is needed. And that productivity growth requires innovation,” Mr Draghi said.

“Structural reforms are essential to create a business environment that is conducive to innovation and a regulatory environment that adapts accordingly. Both national and European level initiatives can contribute to this effort.”