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ECB-EU-EUROZONE-TRADE
ECB divided over protectionist risks to eurozone
FRANKFURT AM MAIN, Oct 11, 2018 (BSS/AFP) – European Central Bank chiefs
were divided at their September meeting over the danger to the eurozone
economy from protectionism and other global threats, with some calling for a
gloomier assessment.
“It was remarked that a case could also be made for characterising the
risks to activity as now being tilted to the downside,” according to a
regular account of the private gathering published by the ECB Thursday.
Following the September 13 meeting, ECB President Mario Draghi told
journalists that risks to the 19-nation single currency area remained
“broadly balanced”.
The account reveals colleagues on the institution’s governing council had
earlier highlighted “risks relating to rising protectionism, vulnerabilities
in emerging markets and financial market volatility having gained more
prominence recently”.
In the end, policymakers decided to stick to the “broadly balanced”
language.
“The underlying strength of the economy was judged to be mitigating
downside risks,” they agreed.
At its meeting in Bali this week, the International Monetary Fund (IMF)
also expressed caution for the eurozone over growing risks, downgrading its
2018 growth forecast from 2.2 to 2.0 percent.
A slowdown in economic activity could trip up the ECB as it winds down its
“quantitative easing” (QE) mass bond-buying scheme, designed to boost
economic growth and inflation by pumping cash through the financial system
and into the real economy.
It is on the home stretch of its exit, slashing monthly purchases of
government and corporate debt by half to 15 billion euros ($17.4 billion) in
October before a planned stop in December.
But with inflation projected to hover around 1.7 percent between this year
and 2020, the central bank remains short of its target of price growth close
to, but below 2.0 percent.
Even after the end of QE, it plans to keep interest rates at historic lows
“through the summer of 2019” to help keep credit flowing to firms and
households.
BSS/AFP/SR/1810 HRS