ECB seeks balance to keep low-inflation recovery on rails

AFP, FRANKFURT AM MAIN: European Central Bank president Mario Draghi will paper over discord among colleagues at a press conference Thursday, analysts predict, with policymakers divided on their response to heftier economic growth unaccompanied by higher inflation.

Top central bankers know the end is in sight for massive support to the 19-nation eurozone.

But the ECB’s governing council meeting in Frankfurt will bring another round in the battle over how quickly to wind down mass bond-buying and ultimately raise interest rates.

Meanwhile, financial markets are on alert for the slightest change in the bank’s stance, after minutes from December’s meeting showed governors plan to “revisit” policy early this year.

The ECB has bought almost 2.3 trillion euros ($2.8 trillion) of government and corporate bonds, offered cheap loans to banks and set interest rates at historic lows, aiming to stoke eurozone growth and boost inflation towards its target of just below 2.0 per cent.

Like other central banks worldwide it has puzzled as higher economic growth—estimated at 2.4 per cent in 2017 -- and reduced unemployment have not brought faster price increases.

Euro area inflation fell to just 1.4 per cent in December, well short of the ECB target, and is seen climbing only to 1.7 per cent by 2020 in forecasts.

“While the strength of the economy suggests that extraordinary policy support is becoming unnecessary, the inflation outlook does not seem to warrant policy tightening,” analyst Jennifer McKeown of Capital Economics summed up.

 

ECB seeks balance to keep low-inflation recovery on rails

AFP, FRANKFURT AM MAIN: European Central Bank president Mario Draghi will paper over discord among colleagues at a press conference Thursday, analysts predict, with policymakers divided on their response to heftier economic growth unaccompanied by higher inflation. Top central bankers know the end is in sight for massive support to the 19-nation eurozone. But the ECBs governing council meeting in Frankfurt will bring another round in the battle over how quickly to wind down mass bond-buying and ultimately raise interest rates. Meanwhile, financial markets are on alert for the slightest change in the banks stance, after minutes from Decembers meeting showed governors plan to revisit policy early this year. The ECB has bought almost 2.3 trillion euros ($2.8 trillion) of government and corporate bonds, offered cheap loans to banks and set interest rates at historic lows, aiming to stoke eurozone growth and boost inflation towards its target of just below 2.0 per cent. Like other central banks worldwide it has puzzled as higher economic growthestimated at 2.4 per cent in 2017 -- and reduced unemployment have not brought faster price increases. Euro area inflation fell to just 1.4 per cent in December, well short of the ECB target, and is seen climbing only to 1.7 per cent by 2020 in forecasts. While the strength of the economy suggests that extraordinary policy support is becoming unnecessary, the inflation outlook does not seem to warrant policy tightening, analyst Jennifer McKeown of Capital Economics summed up.