ECB to hold course as threats to growth linger

8th April, 2019 11:28:20 printer

FRANKFURT AM MAIN: The European Central Bank will hint Wednesday at moves to support the eurozone economy but stop short of new action, analysts expect, as the Frankfurt institution eyes lingering political risks.

Policymakers took the unexpectedly aggressive step in March of announcing a new tranche of cheap loans to banks, shoring up lenders as it was forced to slash its forecasts for growth and inflation between now and 2021, reports AFP.

The ECB also pushed back the earliest possible date it could raise eurozone interest rates off historic lows to 2020, rather than summer this year as previously trailed.

Since then no rays of light have broken through the dark clouds of weak economic data and uncertain political outcomes threatening the single currency area.

The outlook for the bloc depends strongly on the outcome of drawn-out trade talks between Washington and Beijing, as American tariffs on Chinese goods have had knock-on effects for European firms.

President Donald Trump has also yet to row back from a threat to slap import taxes on goods from the European Union.

And Brexit talks have extended beyond Britain’s original March 29 departure date from the EU, prolonging the uncertainty over what barriers to trade could spring up when Britain does finally leave.

ECB President Mario Draghi “will have no choice but to give a downbeat assessment” at his news conference Wednesday, analyst Jack Allen of Capital Economics predicted.

Draghi looks set to repeat his long-standing formulation that “an ample degree of monetary accommodation is still necessary for the continued sustained convergence of inflation” to the bank’s target of just below two percent.

Price growth slowed to just 1.4 percent in March, data released last week showed, and there is little sign of livelier economic expansion lifting it back towards the ECB goal. “Since (the ECB’s) March meeting, the economic data have continued to be disappointing,” Capital Economics’ Allen noted, highlighting weakness in the vital industrial sector visible in both measures of output and forward-looking surveys.