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Draghi sees diminished growth risks even as inflation is lacking

Thursday, April 27, 2017 - 21:48

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Mario Draghi said risks to the euro-area economy have diminished further, even as he stuck to his line that core inflation continues to fall short of the European Central Bank's comfort zone.

[FRANKFURT] Mario Draghi said risks to the euro-area economy have diminished further, even as he stuck to his line that core inflation continues to fall short of the European Central Bank's comfort zone.

"The risks surrounding the euro area growth outlook, while moving towards a more balanced configuration, are still tilted to the downside," the ECB president said in Frankfurt on Thursday, after the Governing Council agreed to keep policy unchanged, as expected by economists. "Underlying inflation pressures continue to remain subdued and have yet to show a convincing upward trend." Mr Draghi added that the region's recovery is becoming "increasingly solid" and that the Governing Council had a discussion on whether to change its assessment on the risks to growth. Rates will stay at present or lower levels for an extended period, and well past the horizon of net asset purchases, which remain flexible in size and duration in case the outlook becomes less favorable, he said.

He said the risks surrounding the euro area growth outlook, while moving towards a more balanced configuration, are still tilted to the downside and relate predominantly to global factors.

The euro rose immediately after Mr Draghi's remarks before giving up the advance soon after. Having been up as much as 0.3 per cent at one point, it was down 0.3 per cent to $1.0874 as of 2.05 p.m. London time.

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For the past few weeks, ECB officials have been publicly debating when they might start to wind down asset purchases and raise interest rates. Economists predict the first hints of an exit from this extraordinary stimulus to come by June 8, when the Governing Council next announces policy and publishes projections on the economic outlook.

The ECB could change its forward guidance as a first step toward phasing out QE at the beginning of 2018 and conducting the first rate hike in the third quarter of that year, according to the survey.

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