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Draghi says euro area still needs extraordinary ECB support
[FRANKFURT] The euro area still needs exceptional support from the European Central Bank's monetary policy to absorb slack and restore stable inflation even as its economy accelerates, President Mario Draghi said.
"We remain firmly convinced that an extraordinary amount of monetary policy support, including through our forward guidance, is still necessary," Mr Draghi said on Monday at his quarterly hearing at the European Parliament's Economic and Monetary Affairs Committee in Brussels.
"Domestic cost pressures, notably from wages, are still insufficient to support a durable and self-sustaining convergence of inflation toward our medium-term objective."
A growing disconnect between the economy's improving prospects and subdued price pressures is shaping the debate ahead of the Governing Council's policy-setting meeting in Tallinn on June 8.
Mr Draghi and his fellow policy makers have acknowledged the strengthening of the recovery while urging patience in outlining an exit strategy from negative rates and their 2.3 trillion-euro (S$3.558 trillion) bond-buying program.
"The economic upswing is becoming increasingly solid and continues to broaden across sectors and countries," Mr Draghi said in his opening statement.
"The fact that domestic consumption and investment are the main engines driving the recovery makes it more robust and resilient to downside risks, which relate predominantly to global factors."
Mr Draghi stressed that "downside risks to the growth outlook are further diminishing", highlighting one of the key signals that the ECB could send next week.
Some policy makers have said they now consider risks to the economy's outlook as broadly balanced.