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Draghi Sees Inflation Optimism in Recovery But Euro a Worry


Thursday, 25 January 2018 21:47 WIB

Bank Sentral Eropa ECBMario Draghi


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Mario Draghi expressed renewed conviction that the euro area’s recovery will revive inflation, pushing the euro to the highest in more than three years despite his concurrent warning against sharp moves in the exchange rate.

Improving economic momentum has “strengthened further our confidence that inflation will converge to close to but below 2 percent,” the European Central Bank president told reporters in Frankfurt on Thursday, adding that domestic price pressures remain muted. “Against this background, recent volatility in the exchange rate represents a source of uncertainty which requires monitoring with regard to its possible implications for the medium term outlook of price stability.”

The euro jumped as much as 1 percent to the strongest level since late 2014, and was up 0.7 percent at $1.2490 at 3:20 p.m. Frankfurt time. It came off its highs after Draghi said he sees “very few chances” that interest rates will be raised this year, as some market pricing has suggested.

Those gains have triggered concern that the downward pressure on prices could complicate the ECB’s gradual exit from extraordinary stimulus. Policy makers decided last year to reduce the amount of additional stimulus they pump into the euro-area economy as of this month, but also stressed that their inflation goal remains out of sight until at least 2020.

Draghi said that an ample degree of stimulus remains necessary for underlying price pressures to converge with the ECB’s aim, but pointed to the variety of its stimulus tools that will help in achieving that.

“This continued monetary support is provided by net asset purchases, by the sizable stock of acquired assets, and the forthcoming reinvestments and by our forward guidance on interest rates,” he said.

The ECB earlier reiterated its plan to continue buying 30 billion euros ($37 billion) of assets a month until at least the end of September, while keeping interest rates unchanged.

Source : Bloomberg


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