ECB President Mario Draghi said in a speech that it’s “not yet certain” whether Eurozone is experience a “more lasting deterioration in the growth outlook” right now. The loss of momentum has been “predominantly driven by pervasive uncertainty in the global economy”. Domestic economy has “remained relatively resilient” and expansion drivers “remain in place”. But risks remained “tilted to the downside”.
Draghi pointed to continuing weakness in wold trade which has “significantly affected the manufacturing sector” and Eurozone is now “seeing a more persistent deterioration of external demand”. Intra-euro area trade also slowed steeply last year. And, “recoupling of intra- and extra-euro area trade growth in a downward direction has not occurred since the start of the global financial crisis”. For now, “current data suggest that external demand has not yet spilled over significantly into domestic demand”. But ” risks have risen in the last months and uncertainty remains high”.
Draghi also reiterated that “substantial accommodation is still needed”. At last meeting, ECB decided to extend the date-based leg of the rate guidance “at least through the end of 2019”. That ECB will continue too the “very sizeable stocks of assets” bought under the asset purchase program for even longer. Also, Draghi added that “we would ensure that monetary policy continues to accompany the economy by adjusting our rate forward guidance to reflect the new inflation outlook.” It suggests ECB is ready to extend delay a rate hike further when necessary.
