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Dragui forecasts Euro-area return to growth by end of 2013

Thursday, June 6th 2013 - 23:12 UTC
Full article 3 comments
“We have a range of different instruments” said the ECB president “We have a range of different instruments” said the ECB president

European Central Bank President Mario Draghi said on Thursday that the Euro-area economy will return to growth by the end of the year, handing policy makers a reason to hold back fresh stimulus. Draghi spoke after the ECB Governing Council in Frankfurt left its main refinancing rate at 0.5% after reducing it by a quarter points last month.

“Euro-area economic activity should stabilize and recover in the course of the year, albeit at a subdued pace,” Draghi told reporters. “We will monitor very closely all incoming developments and we stand ready to act.”

The Euro climbed to a four-week high against the dollar and Germany’s two-year note yield rose to the highest level since February.

An improvement in sentiment is giving Draghi time to consider a menu of further measures that the ECB may deploy to aid the 17-nation economy, now in its longest recession since the Euro began trading in 1999.

Among the options he cited: Cutting the so-called deposit rate into negative territory, lending more money to banks, easing collateral rules, reviving the market for asset-backed securities and providing investors with greater guidance on how long borrowing costs will stay low.

“We have a range of different instruments,” said Draghi. Economic data since the ECB meeting last month “were not enough to grant immediate action,” he said.

The ECB held its deposit rate at zero and its marginal lending rate at 1%. Draghi said the consensus of officials had been not to act, given the recent data.

As the ECB revamped its economic outlook, Draghi called inflation risks “broadly balanced” and noted “downside risks” for growth.

The bank cut its forecast for the Euro area’s economy to show contraction of 0.6% this year from an estimate of minus 0.5% made in March. Officials raised their projection for next year to 1.1% from 1%.

Draghi described the untapped Outright Monetary Transactions bond-buying program as “the most successful monetary policy measure” of recent times, crediting it with calming financial markets and defending it ahead of a review by Germany’s constitutional court.

He played down differences within the ECB 23-member council, saying reports of splits over the direction of policy were a “dramatization.”

“You have different views in all central banks,” he said. “In a period of uncertainty, there are obviously a variety of opinions.”

On the topic of bank supervision, Draghi said the ECB wants governments to make an explicit commitment to backstop banks. He said it’s essential to strengthen the resilience of the region’s lenders and repeated that his staff is currently reviewing the health of balance sheets.

Categories: Economy, Politics, International.

Top Comments

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  • Ayayay

    Northern Europe, yes.

    Jun 07th, 2013 - 01:08 am 0
  • Conqueror

    @1 Meanwhile, argieland's gas imports have increased by 47% and it has no money, Venezuela has started importing toilet roll, cosmetics, petroleum and food. No, sorry, it always has to import food. The indefatigable “Pepe”, who turns out to be “fatigable” after all, has just returned from a worldwide tour with his begging bowl, Brazil is desperate for markets as mercosur has a stumbling block and Paraguay is looking at an upturn in its economy as it finds oil, associates itself with the Pacific Allliance and casts off the shackles of the mercosur dictatorship. Great, innit?

    Jun 07th, 2013 - 11:17 am 0
  • ChrisR

    @2 Conqueror

    How many times have you castigated the argies, quite rightly, about deflection and being off topic?

    So let's get back to Dragui. 'We have a range of instruments' he says, so why haven't they used them before, what were they waiting for, complete and utter meltdown of their credibility? Well, they have had that for a number of years.

    There is nothing these cunts can say or do that would interest me at all given their past performance.

    Jun 07th, 2013 - 06:59 pm 0
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