European Central Bank (ECB) is very much likely to continue with its accommodative monetary policies according to European Central Bank’s (ECB) president Mario Draghi. According to Mr. Draghi’s speech in Frankfurt, the policymakers at the central bank is yet to see any evidence of a sustained rise in inflation. In recent days, there have been lots of concerns in the financial markets over the threat of looming inflation amid stagnant growth. While the recent data indicated that the consumer price in the Eurozone has hit a two-year high, it remains at 0.5 percent y/y, far below ECB’s 2 percent target. Mr. Draghi said, “We do not yet see a consistent strengthening of underlying price dynamics”.

The grim assessment from Mr. Draghi with regard to inflation and growth strongly suggest that the ECB is likely to extend its current monetary policy of bond buying in the tune of €80 billion a month when it expires next March. Mr. Draghi said, “Going forward, our assessment will depend on whether we see a sustained adjustment in the path of inflation towards that objective. And that means that inflation convergence towards 2% is durable, even with a reduction in monetary accommodation. Inflation dynamics, in other words, need to be self-sustained.”

ECB will release its latest projections in the December meeting; however, it is unlikely that ECB will announce the extension at that meeting. It is likely to wait till next year to do that.