May 14, 2018 / 12:00 PM / 10 months ago

ECB policymakers stick to upbeat narrative despite slowdown

COPENHAGEN/PARIS (Reuters) - Three European Central Bank policymakers stuck with an upbeat assessment of the euro zone economy on Monday, shrugging off signs of a slowdown in inflation and activity.

FILE PHOTO: European Central Bank (ECB) executive board member Sabine Lautenschlaeger attends at a news conference at the ECB in Frankfurt October 26, 2014. REUTERS/Ralph Orlowski

Bank of France governor Francois Villeroy de Galhau and ECB board members Sabine Lautenschlaeger and Peter Praet all said a recent easing of price growth was likely to be temporary, signaling the central bank was still on course to withdraw its monetary stimulus.

Villeroy went as far as saying the ECB could soon clarify the timing of its first increase in interest rates since 2011, which he expects to happen “some quarters” after the end of its bond-buying program.

Markets broadly expect the stimulus program to end in December and be followed by a rate hike towards the middle of next year, though some analysts have pushed back their forecasts after a run of subdued data.

So far, the ECB has said rates are to remain at current levels for an “extended period of time, and well past” the conclusion of its the 2.55 trillion euro ($3.06 trillion) money-printing scheme.

“As far as the first rate hike is concerned, we could give additional guidance on its timing, ‘well past’ meaning at least some quarters but not years, and additional guidance on its contingency on the inflation outlook,” Villeroy said.

Lautenschlaeger, speaking in Copenhagen, said she was “relaxed” as the euro zone economy was still performing as the ECB expected.

“It (the economic slowdown) is still within our projections and you need to get more data in order to see whether it is only temporary,” Lautenschlaeger said.

Her words were echoed by chief economist Peter Praet, who said in London the ECB still expected price growth to hover around 1.5 percent in coming months, despite a slowdown in April.

“On the basis of current futures prices for oil, inflation is likely to hover around 1.5 percent in the coming months,” Praet said, repeating a speech delivered a week earlier.

Headline inflation slowed to an annual 1.2 percent in April from 1.3 percent while price growth excluding volatile food and energy, the ECB’s preferred measure, came in at 1.1 percent from 1.3 percent a month earlier.

The bank targets an inflation rate of just below 2 percent.

Reporting By Stine Jacobsen in Copenhagen and Leigh Thomas in Paris; Writing by Francesco Canepa; editing by John Stonestreet

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