More upbeat ECB keeps ammunition in reserve

The ECB nudged up its 2016 growth and inflation forecasts yesterday, arguing the risks facing the economy had declined and supporting expectations it would keep further stimulus under wraps at least until the autumn.

Keeping rates unchanged deep in negative territory, ECB president Mario Draghi argued that more stimulus was still coming from measures approved but not yet implemented, effectively dismissing calls for more ECB action and maintaining his argument for patience.

The ECB already plans to buy €1.74trn worth of assets in an attempt to revive inflation and kick-start growth.

It had been worried the 19-member eurozone was at risk of falling into a hard-to-break deflationary spiral.

Next week it starts buying corporate bonds and will offer ultra-cheap loans in late June, both measures aimed at cutting funding costs for corporate clients to induce investment and boost hiring.

Yet, Mr Draghi’s carefully nuanced statement underlined how fragile that recovery remains and how vulnerable it is to risks, including a slowdown in the global economy and possible fallout from Britain’s June 23 EU referendum.

“Additional stimulus... is expected from the monetary policy measures still to be implemented and will contribute to further rebalancing the risk to the outlook for growth,” Mr Draghi said.

“The risks to the euro area growth outlook remain tilted to the downside, but the balance of risks has improved on the back of the monetary policy measures taken and the stimulus still in the pipeline,” Mr Draghi added, inserting a slightly more optimistic description of risk than recently seen.

Mr Draghi also said the bank has not seen low oil prices feeding into wages, a key concern for policymakers as such a second-round effect would signal a loss of confidence in the ECB’s ability to return inflation back to its target of close to 2%.

“Overall, the statement chimed with the ‘patience’ ECB president Mario Draghi mentioned in April,” BNP Paribas economist Luigi Speranza said.

“The changes in the ECB’s June press statement gave us the sense the ECB is becoming more confident in its central scenario of a moderate, but steady euro zone economic recovery.”

The ECB upgraded its 2016 eurozone growth forecast after first-quarter growth beat all expectations, seeing a 1.6% expansion, above the 1.4% it predicted in March.

It kept its forecast of 1.7% for next year unchanged while trimming it for 2018 to 1.7% from 1.8%.

It also raised its 2016 inflation forecast to 0.2% from 0.1%, citing factors including the base effect of a recent rise in oil prices.


Setting sail to travel the world as part of your job has a romance all of its own but for marketing manager Máire Cronin and engineer Mark Crowe it led to love.Wedding of the Week: Cruise ship co-workers Máire and Mark sail off into sunset

One of the genres that has seen exponential growth in the podcast world is the sleepcast. Open Spotify on your phone in the evening and a number of offerings are available, writes Eoghan O'SullivanThe Podcast Corner: podcasts that will put you to sleep

Cutting-edge animation was paired with the look of an old-fashioned family film for Call Of The Wild, writes Esther McCarthyCall of the Wild: CGI dogs have their day in new Disney adventure

A new exhibition recalls the late entertainer Thom McGinty, writes Richard Fitzpatrick.Remembering The Diceman: street performer and social activist

More From The Irish Examiner