Today (April 26, 2018), European Central Bank (ECB) President Mario Draghi voiced the following comments after the ECB governing council’s interest rate decision (the existing policy remains unchanged) in Frankfurt, Germany:
GROWTH OUTLOOK
“Incoming information since our meeting in early March points towards some (economic growth) moderation while remaining consistent with a solid and broad-based expansion of the euro area economy.”
UNDERLYING STRENGTH
“The underlying strength of the euro area economy continues to support our confidence that inflation will converge towards our inflation aim of below, but close to 2 percent over the medium-term.”
UNDERLYING INFLATION REMAINS SUBDUED
“Measures of underlying inflation remain subdued and have yet to show convincing signs of a sustained upward trend.”
MONITORING FX RATES
“The Governing Council will continue to monitor developments in the exchange rate and other financial conditions with regard to their possible implications for the inflation outlook.”
The economy of the European nineteen-country bloc has been expanding for the past twenty quarters now, so the big question faced by policymakers is how quickly to withdraw stimulus. Do it too quickly, and the economic impact can be a sudden reversal of economic fortune. Drag it out too long, and the ability to use stimulus the next time it is needed to address an economic slump is severely compromised.
The main stimulus tool has been the ECB’s 2.55 trillion euro (US$3.10 trillion) bond purchase programme (30 billion euros per month), the effect of which has been to reduce borrowing costs and stimulate economic growth.
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