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Draghi drives ECB toward stimulus even as GDP grows
By Korea HeraldPublished : May 13, 2014 - 20:44
The euro-area’s fastest economic growth in three years probably won’t be enough to stop Mario Draghi from easing monetary policy.
Even with data this week predicted to show the expansion accelerated in the first quarter, the European Central Bank president looks set to push ahead with measures that could range from rate cuts to liquidity injections. Inflation stuck at less than half the ECB’s goal points to a revival that is still too slow, according to economists from UniCredit SpA to UBS AG.
“A slightly stronger economy isn’t going to change much,” said Marco Valli, chief euro-area economist at UniCredit in Milan, who expects the ECB to cut both the benchmark and the deposit rate in June. “The ECB is becoming increasingly intolerant of low inflation.”
Draghi is fighting to prevent a prolonged period of subdued price gains from derailing the recovery in the 18-nation currency bloc before it becomes entrenched. His declaration last week that officials are “comfortable” with taking action in June suggests a new policy response is imminent.
Three-quarters of respondents in the latest Bloomberg Markets Global Investor Poll, which surveys traders, bankers and money managers who subscribe to the Bloomberg Professional service, said deflation is a greater threat to the euro area than inflation.
Gross domestic product in the euro area probably climbed 0.4 percent in the three months through March, according to the median of 40 estimates in a Bloomberg News survey. That would be twice as fast as the prior quarter and the highest rate since the beginning of 2011. The region exited its longest-ever recession in the second quarter of last year.
The European Union’s statistics office in Luxembourg is due to release the GDP data at 11 a.m. on May 15. Germany, France, Italy, Austria and the Netherlands will release their national figures earlier in the day.
Growth in Germany, the region’s largest economy, will accelerate to 0.7 percent, and Italy and France will post their second straight quarterly expansions, according to separate Bloomberg surveys.
“The recovery is proceeding, but it’s proceeding at a slow pace and it still remains fairly modest,” Draghi said last week in Brussels after the ECB left its benchmark interest rate at a record low of 0.25 percent and its deposit rate at zero. “There is consensus about being dissatisfied with the projected path of inflation.” (Bloomberg)
Even with data this week predicted to show the expansion accelerated in the first quarter, the European Central Bank president looks set to push ahead with measures that could range from rate cuts to liquidity injections. Inflation stuck at less than half the ECB’s goal points to a revival that is still too slow, according to economists from UniCredit SpA to UBS AG.
“A slightly stronger economy isn’t going to change much,” said Marco Valli, chief euro-area economist at UniCredit in Milan, who expects the ECB to cut both the benchmark and the deposit rate in June. “The ECB is becoming increasingly intolerant of low inflation.”
Draghi is fighting to prevent a prolonged period of subdued price gains from derailing the recovery in the 18-nation currency bloc before it becomes entrenched. His declaration last week that officials are “comfortable” with taking action in June suggests a new policy response is imminent.
Three-quarters of respondents in the latest Bloomberg Markets Global Investor Poll, which surveys traders, bankers and money managers who subscribe to the Bloomberg Professional service, said deflation is a greater threat to the euro area than inflation.
Gross domestic product in the euro area probably climbed 0.4 percent in the three months through March, according to the median of 40 estimates in a Bloomberg News survey. That would be twice as fast as the prior quarter and the highest rate since the beginning of 2011. The region exited its longest-ever recession in the second quarter of last year.
The European Union’s statistics office in Luxembourg is due to release the GDP data at 11 a.m. on May 15. Germany, France, Italy, Austria and the Netherlands will release their national figures earlier in the day.
Growth in Germany, the region’s largest economy, will accelerate to 0.7 percent, and Italy and France will post their second straight quarterly expansions, according to separate Bloomberg surveys.
“The recovery is proceeding, but it’s proceeding at a slow pace and it still remains fairly modest,” Draghi said last week in Brussels after the ECB left its benchmark interest rate at a record low of 0.25 percent and its deposit rate at zero. “There is consensus about being dissatisfied with the projected path of inflation.” (Bloomberg)
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Articles by Korea Herald
