ECB's Draghi Sees Wage Pressure, Won't Allow Defeat on Inflation

(Bloomberg) -- Mario Draghi defended the European Central Bank’s inflation goal and said he sees increasing wage pressure that will help the institution meet its mandate.

People say “it’s been so long when we haven’t reached the below but close to 2 percent, why don’t you lower inflation to something lower and accept defeat,” the ECB president told students in Frankfurt. “And that’s exactly why we are not doing it, because we don’t accept defeat.”

As Draghi nears the end of his eight-year term and contenders to replace him line up, a debate has broken out over whether the central bank’s strategy for achieving price stability is appropriate. Policy makers aim to keep price growth just under 2 percent over the medium term but have fallen far short of that for years despite trillions of euros of stimulus.

Draghi said the ECB’s extraordinary stimulus has created more than 10 million jobs and is pushing wages higher, which will eventually feed through into prices.

“We don’t see yet feedback or the transmission of these higher nominal wages growth into a higher inflation. It’s taking longer. Right now, one of the reasons is that profit margins are being compressed and we know that it’s a matter of being patient and persistent with the accommodative monetary policy and it will come, it will happen.”

In his 30-minute dialogue with students, Draghi also criticized cryptocoins as “very, very risky assets” that fail to meet the definition of a currency, and warned that markets are still being too slow in preparing for the possibility of a no-deal Brexit.

On his own future after his term ends in October, he said he has made “no plans whatsoever.”

To contact the reporter on this story: Piotr Skolimowski in Frankfurt at pskolimowski@bloomberg.net

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, David Goodman

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