Eurozone strengthening ‘but it’s early days’
IT IS too early for the European Central Bank to declare victory in its quest to boost eurozone inflation despite signs the bloc’s economic recovery is strengthening, ECB president Mario Draghi says.
Draghi’s comments yesterday confirmed he was in no rush to raise interest rates or wind down the ECB’s €2.3-billion (R34.2bn) bond-buying programme, despite insistence from richer eurozone countries such as the Netherlands and Germany.
But he did hint at potential changes to the ECB’s ultra-loose policy message.
“Incoming data confirm that the cyclical recovery of the euro area economy is becoming increasingly solid and that downside risks have further diminished,” he told a hearing of the Dutch parliament.
“Nevertheless, it is too early to declare success. Underlying inflation pressures continue to remain subdued and have yet to show a convincing upward trend.”
The ECB is expected to tweak its policy message next month to reflect an improved economic situation but keep policy on hold.
Sources said last month some or all the references to prevailing downside risks to the outlook, to the possibility of further rate cuts or to larger asset purchases, may be taken out.
“Some of the elements of our forward guidance are meant to address the tail risks of inflation behaviour,” Draghi said.