President of the European Central Bank Mario Draghi, told the Economic and Monetary Affairs of the European Parliament that the economy is stabilizing, but added that any further increase in commodity prices could hamper economic activity.
“The available indicators for the first quarter of 2012 mass confirmed the stabilization of economic activity at a low level,” said Draghi.
“The latest development is mixed, according to a study that reveals the prevailing insecurity. Looking ahead, growth should be supported by demand from abroad, very low interest rates in the short term as well as our stimulus measures, “he said.
In his words, inflation is likely to remain above 2% this year because of rising energy prices and indirect taxes. “The Management Board continues to expect the level of annual inflation to fall below 2% in early 2013,” said ECB President.
In a letter yesterday to the EP Dear noted that the QE for 1 trillion. dollars through a 3-year loans for euro area banks at an interest rate of just 1% per year, proceeded in two stages between December and February, through the banking system and serve the real economy, reported MarketWatch.
“The operation in February, attracted 800 banks, the vast majority of which are small, and indeed are those institutions that lend to the maximum extent small and medium entrepreneurs. Therefore, we believe that liquidity will eventually serve the real economy, “he said.
ECB President, however, that signals to reach the money to businesses are still too few.
Dragi argues that the means credit institutions prefer to invest in overnight deposits with the ECB rather than lend to each other, largely come from other banks, rather than get cheap long-term loans.
He said it “suggests that despite significant investment of funds in overnight deposits, liquidity has been transferred within the banking system.”