ECB says 2016 was best year since crisis
FRANKFURT AM MAIN: The European Central Bank judged that it had a successful 2016, arguing in its annual report that it had warded off deflation and nurtured economic recovery in the eurozone.
“Though the year began shrouded in economic uncertainty, it ended with the economy on its firmest footing since the crisis,” president Mario Draghi wrote in a foreword.
In March last year, the ECB responded to alarmingly low inflation by boosting its massive bondbuying scheme, lowering interest rates and extending cheap loans to banks.
The ECB’s moves were designed to pump cash through the financial system and into the real economy, making it easier for businesses and households to borrow for spending and investment – powering growth and ratcheting up inflation towards the ECB’s target of just below 2.0 percent.
By December, the eurozone economy looked healthy enough for the Frankfurt institution to scale back its bond-buying from the 80 billion euros (US$85 billion) per month set in March to its previous level of 60 billion euros.
“This reflected the success of our actions earlier in the year: growing confidence in the euro area economy and disappearing deflation risks,” Draghi judged.
But the central bank sees its task as far from done.
The 19-nation eurozone faces political risk at home from elections in powerful members France and Germany, while weak global growth and political uncertainty sap overseas demand for the region’s products.
Meanwhile, although inflation briefly spiked past its target in February thanks to higher oil prices, it fell back in March and is far from the “self-sustaining” level the ECB strives to reach as growth in prices and wages remains sluggish.
For now, Draghi and his colleagues in the bank’s governing council believe the economic recovery is still dependent on their massive support. — AFP