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Draghi Recognizes Weaker Momentum as ECB Affirms Solid Outlook
Thursday, 26 April 2018 20:59 WIB | FISCAL & MONETARY |Mario Draghi

Mario Draghi acknowledged that momentum weakened at the start of the year even as he signaled his confidence in the euro area™s economic health.

œIncoming information since early March points to some moderation while remaining consistent with a solid and broad-based expansion of the euro-area economy, the European Central Bank president said at a news conference in Frankfurt. œUnderlying trends continue to support our confidence that inflation will converge toward our inflation aim over medium term.

The Governing Council confirmed expectations by leaving policy unchanged earlier on Thursday. The ECB currently foresees bond-buying at a monthly 30 billion euros ($37 billion) until at least September, with rates on hold œwell past then.

The ECB™s task has been complicated by data suggesting that the euro area™s strongest growth in a decade may be faltering. As well as waning industrial output and deteriorating business confidence, the threat of a global trade war is hanging over Europe™s export-oriented economy.

Policy makers have signaled, however, that they expect growth to stabilize at a solid pace. An initial look at euro-area gross domestic product in the first quarter will come next Wednesday, with economists predicting growth of 0.5 percent -- weaker than the 0.7 percent recorded at the end of 2017, but still pointing to above-potential expansion.

In his opening statement, Draghi also repeated that policy makers will continue to monitor exchange-rate developments and their potential impact on inflation.

Companies have complained about the euro™s gain of almost 12 percent in the last year. Credit Suisse Group AG has estimated that each 10 percent gain shaves 6 percent off of European stocks™ earnings per share. Even if the single currency™s rise has petered out for now, exporters like Continental AG andVolkswagen AG flagged the exchange rate as a risk.

Draghi reaffirmed his confidence that inflation will eventually rise to the ECB™s goal of just under 2 percent, even if there are still œno convincing signs of a sustained upward trend. While wages may be finally headed higher, consumer-price growth was unexpectedly revised down to 1.3 percent in March from an initial estimate of 1.4 percent.

Source : Bloomberg

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