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December, 201811:48 AM



ECB sees inflation still dependent on its support

ECB sees inflation still dependent on its support

Inflation in the eurozone remains dependent on "signficant" support from the European Central Bank...

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27.11.2018 12:17 PM

Inflation in the eurozone remains dependent on "signficant" support from the European Central Bank, the institution's president Mario Draghi said Monday, as risks rise and growth slows in the currency bloc.

"To ensure that inflation continues to move towards our aim in a sustained manner, a significant degree of monetary policy stimulus will be maintained, even after the end of net asset purchases," Draghi told European Parliament lawmakers.

The ECB is widely expected to end mass buying of government and corporate bonds, known as "quantitative easing", next month when governors will receive the bank's latest growth and inflation forecasts.

Over more than three years it has pumped around 2.6 trillion euros ($2.95 trillion) into the eurozone financial system, aiming to fuel expansion and power price growth towards its target of just below 2.0 percent.

Policymakers currently see inflation on track over the coming years, but growth has slowed in the 19-nation single currency area in recent months.

While some of the braking effect came from one-off factors, like disruption to carmakers from new emissions tests, the eurozone is also contending with a "structural adjustment to a lower growth path" compared with the remarkable pace seen in 2017, Draghi judged.

After years of expansion firms in some countries are hitting limits to the pace of growth, including a labour market picked clean of qualified workers.

"Is this a right picture, or is it subject to change, to reveal that we are having a serious recession ahead? The impression we have in the governing council (of the ECB) is that this is not the case," he told MEPs.

Draghi reiterated his message that increasing trade protectionism, upsets in emerging markets and financial market volatility remained major risks to growth.

But the end of bond-buying will not leave the economy in the lurch, he promised, with interest rates set to remain low and the ECB planning to reinvest the proceeds from its massive stock of bonds as they mature.

Draghi did not directly address the continuing showdown between Rome and Brussels over Italy's budget for next year, which European officials say risks blowing up the deficit without creating growth.

He did however say that all countries' spending plans looked "with perhaps one exception pretty expansionary" or favourable to growth.
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