By Laurie Laird
LONDON (MaceNews) – Eurozone inflation is on track to accelerate by year end, despite a recent downturn in a range of leading indicators, but trade tensions add a new degree of uncertainty to forecasting, according to the president of the European Central Bank Thursday.
Mario Draghi delivered a rather upbeat economic outlook, defying recent softness in the euro zone purchasing managers’ index and a closely-watched German business confidence index, calling the slowdown a “pull back from an unusually strong” export performance in the closing quarter of 2017. Euro zone economic growth slipped to a quarterly rate of 0.4% in the first quarter of 2018, from a 0.7% gain in the previous period.
However, recent trade tensions between the EU and the U.S. have complicated the outlook, adding a new degree of “uncertainty” to the Bank’s forecasts, Draghi added. While hailing the more positive tone between U.S. President Donald Trump and European Commission President Jean-Claude Juncker after trade talks on Wednesday, Draghi stressed that the Bank has yet to fully assess the effects of trade tariffs recently levied by both the U.S. and the EU. A trade war would certainly create “a different climate,” he told reporters.
Given new risks to the economic outlook, Draghi repeated his pledge to keep rates at current levels through the summer of 2019 or “for as long as necessary,” repeating the language first used in the summary of the June meeting of the governing council. European-language translations of that summary suggested that a rate hike could come sooner, but Draghi urged reporters to regard the English-language version as most representative of the council’s thinking. The translations discrepancies stirred speculation that northern European representatives to the governing council have urged the Bank to begin tightening monetary policy earlier in 2019.
Draghi also addressed U.S. accusations of current manipulation, pointing out that the nominal euro exchange rate has actually appreciated over the past 12 to 18 months, stressed that the “exchange rate is not a policy target.”
— Courtesy of MT Newswires