US economy

ECB’s Lagarde Says Euro-Zone Slowdown Shows Signs of Easing



(Bloomberg) — Explore what’s moving the global economy in the new season of the Stephanomics podcast. Subscribe via Apple Podcast, Spotify or Pocket Cast.

Christine Lagarde said the euro zone’s economic slowdown is showing tentative signs of bottoming out, sending the single currency higher as she spoke after her first policy meeting as president of the European Central Bank.

There are “some initial signs of stabilization” and a “mild increase in underlying inflation,” she told reporters on Thursday. She repeated that risks to growth remain on the downside but said they are “somewhat less pronounced.”

Follow Lagarde’s press conference in our live blog

The jumped as high as $1.1154 before paring gains to trade up 0.1% at $1.1142 at 2:55 p.m. Frankfurt time.

Still, Lagarde unveiled updated economic forecasts that show the outlook remains muted for now. Growth will be 1.1% next year — a slight revision lower — and 1.4% in 2021, the bank predicted. The first outlook for 2022 showed an expansion of 1.4% that year. Inflation is seen at 1.6% in 2022 — still below the goal of just under 2%.

The Governing Council earlier held its deposit rate at a record-low minus 0.5%, and bond purchases at 20 billion euros ($22 billion) a month, sticking to a controversial package unveiled in September.

Lagarde also pledged the central bank’s first strategic review since 2003, giving it an opportunity to assess whether the inflation goal needs to be adjusted. On Thursday, she said such a review is “overdue” and she aims to start it in January, completing it before the end of the year.

It needs to be “comprehensive” and include consultation with members of the European Parliament, the academic community and representatives of civil society, she said. She added that there is no “preconceived landing zone” but it will address challenges including climate change, technology, and rising inequality.

Her plans have worried some officials, who fear being diverted from their primary mandate of restoring price stability. Inflation has averaged just 1.2% so far in 2019, despite years of unprecedented and often contentious stimulus.

Moreover, while some economic indicators have suggested lately that the bloc’s slowdown might be easing, Germany remains embroiled in its worst manufacturing slump in a decade, and the U.S.-China trade war and Brexit have continued to weigh on growth.

The subdued outlook raises questions over whether the central bank has enough monetary ammunition left. Even officials most supportive of stimulus have signaled a reluctance to cut the deposit rate deeper below zero, and Lagarde herself again warned about detrimental side effects such as financial bubbles, squeezes on bank profitability and discontent among savers.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





READ SOURCE

Leave a Reply