More needs to be done to fix eurozone

THE euro fell against the pound and the dollar after a senior central bank official said more needs to be done to boost the single currency economy.

European Central Bank council member Ewald Nowotny said ‘it’s quite obvious’ that the region needs more support to stimulate growth and return stubbornly low inflation to target.

It fuelled speculation that the ECB is preparing to ramp up its quantitative easing programme at the same time as the Bank of England and US Federal Reserve weigh up when to raise interest rates. The euro slid lower on global currency markets with the pound rising for a second day towards €1.36.

‘We’re clearly missing our target,’ said Nowotny, adding that ‘additional’ measures will needed to reinvigorate the economy.

The ECB is currently pumping €60bn (£44bn) a month into the economy through QE to stimulate growth and stave off deflation.

The programme, which was launched in March, is due to run to September next year but anal ysts now believe it will be extended.

Chris Hare, an economist at Investec, said: ‘We still think that additional QE will be appropriate at some point, given global growth risks and the weakness of eurozone inflation.’

The recovery in Europe has lagged behind that in the US and the UK since the Great Recession and according to the International Monetary Fund will continue to do so in the coming years ( see table). Speculation is building over when rates will finally rise in Britain and America – with some expecting the Fed to move in December and the Bank of England next year.

‘Interest rates are simply too low,’ said Peter Dixon, an economist at Commerzbank.