ECB Hints at Expanded Stimulus Measures
NEWTON: Now, a big rally today for European shares, and that's thanks to a message from the European Central Bank. After its first meeting following weeks of market turmoil, the ECB said it will continue to be supportive.</s>MARIO DRAGHI, PRESIDENT, EUROPEAN CENTRAL BANK: The governing council emphasized, as I said a moment ago, the willingness and ability to act if warranted by using all the instruments available within its mandate, and in particular regarding the asset purchase program that provides myself sufficient flexibility as far as the horizon, the size, and the parameters.</s>NEWTON: ECB president Mario Draghi there. Today, he did, indeed, mark his 68th birthday --</s>NEWTON: -- by making it clear --</s>NEWTON: There it is, the birthday party boy. He made it clear the central bank could prolong the program known as quantitative easing if necessary. So, he kind of threw his own party, because he announced the ECB is cutting its forecasts for eurozone growth for this year and the next. The ECB also slashed projections for inflation, saying consumer prices may only rise by 0.1 percent this year. And a reminder that the target for inflation is 2 percent. Now, just about everyone talks about stimulus. The ECB has been buying $67 billion worth of government bonds and other assets since March, effectively printing money. Draghi went on to talk about risk, pointing a finger squarely at the slowing growth in China.</s>DRAGHI: We are observing a weakening of the prospects for the Chinese economy. This has two effects, substantially. One is through the trade channels for weakening the economies of other -- of the rest of the world. Because China by now is a large share of the world economy, and has a confidence effect, as we've seen, on the stock markets and all the other financial markets, which is also operating on the negative side.</s>NEWTON: Ken Rogoff, Harvard professor and former chief economist at the IMF, joins me now, live from Cambridge, Massachusetts. And Ken, to give you credit yet again -- you seem to be doing this a lot -- you were very prescient about your warnings about China. And despite what Mr. Draghi said there, do you really think this is top of mind for him right now, that China is really worrying all central bankers around the world more than it would have a few years ago?</s>KEN ROGOFF, PROFESSOR, HARVARD UNIVERSITY: Oh, I don't think there's any question about that, that China's gotten bigger. Germany sells a lot to China, Europe does, it's a very important market. So, given that they weren't growing that fast to start with, to have Chinese check in. And as Mario Draghi said, it's both the trade and royal financial markets. Yes, it's unpleasant, and it's no surprise they've talked up their easing more. Although it's unclear how much the ECB alone can do at this point.</s>NEWTON: And many people were happy, obviously, to see him talking about that quantitative easing again. We'll remind everybody that they were late to the party.</s>ROGOFF: Indeed.</s>NEWTON: Many people thought he should've done it sooner. Again, we will point, Ken, to -- I was re-reading -- I re-tweeted your book a few weeks ago, "This Time Will Be Different," and it talks a lot about the financial crisis and debt. A lot of that in Europe having to do with Greece right now. Ken, when you look at this whole situation, how much do you think Europe can hold it together in the next year or two to come, given all the adversity? And we have to mention, even the migrant crisis. Because while it may not affect the economy head on, it certainly does provide another level of political discord, which can also affect things in Europe.</s>ROGOFF: Well, I think Europe is healing, and Europe actually, believe it or not, has been one of the bright spots on the global economy. It's one of the few places that's doing better than the IMF had thought a year or two ago. Low oil prices, the euro has gone down. The migrant crisis, of course, is a profound humanitarian crisis, existential crisis. But you know, it could work out that it helps unify Europe. It could tear it apart, but it could help unify it. It's certainly very distressing.</s>NEWTON: Yes, absolutely distressing. Ken, thanks so much. We appreciate you talking to us today, and we want to go now to that stimulus message that we were just talking about from the ECB president also helped reassure investors on Wall Street. That gain was hard-fought today, I have to tell you. They were in negative territory twice. The US stocks closed mostly higher for a second day. The Dow was off session highs after weekly jobless claims rose to a two-month high. On Friday, investors, though, will be watching for the key US monthly jobs numbers. Now we know for sure. France says it is now certain that debris found in July is from missing Malaysian Airlines flight 370. What this means for the investigation, that's up next.