ZCZC
BCN-16
ECB-EUROZONE-ECONOMY
ECB sees ‘no reason’ for eurozone slowdown
FRANKFURT AM MAIN, Nov 17, 2018 (BSS/AFP) – European Central Bank
President Mario Draghi said Friday he saw “no reason” why growth in the
eurozone should wither, minimising a sharp slowdown in the third quarter.
“There is certainly no reason why the expansion in the eurozone should
suddenly come to an end,” Draghi said at a Frankfurt conference, in comments
confirming his determination to end massive central bank support for the
economy this year.
But he added that if bank lending dried up or inflation fell back, then
that “should in turn be reflected in an adjustment in the expected path of
future interest rates.”
That would suggest interest rates could remain at historic lows beyond
summer 2019, analysts said.
The ECB chief “just sent a clear signal of the ECB’s willingness to err on
the side of caution” before raising rates, ING Diba bank economist Carsten
Brzeski commented.
Draghi repeated his assessment that risks to economic growth in the bloc
were “broadly balanced” despite looming threats.
That judgement would back ECB plans to end in December its “quantitative
easing” stimulus to the economy, designed to bring inflation up to its target
of just below 2.0 percent.
After more than three years, the bank will stop regular purchases of
government and corporate bonds that have reached a total of more than 2.5
trillion euros ($2.8 trillion), pumped into the economy to stimulate growth.
Growth in the 19-nation single currency area slowed to just 0.2 percent
between July and September, with shrinking output in heavyweight economy
Germany a major factor.
“A gradual slowdown is normal as expansions mature and growth converges
towards its long-run potential,” Draghi said.
He also underlined “one-off factors” such as cold weather, a flu outbreak,
industrial action and the introduction of new car emissions tests that have
braked production in the vital sector since September.
But the greater danger, he argued, was from “trade uncertainty… in
particular relating to protectionism” that could further weigh on already
sluggish global trade growth.
While US President Donald Trump’s “America first” White House has struck a
new accord with Mexico and Canada, his confrontations with China and the
European Union over trade are still on the boil.
For now, a “virtuous circle between employment, labour income and
consumption” at home helps the eurozone weather headwinds from abroad, Draghi
noted.
BSS/AFP/HR/1000