ECB: continued recovery, but weigh uncertainties. Inflation will remain low in the coming months – Il Sole 24 Ore

The economic recovery in the euro area “is continuing, driven mainly by the performance of private consumption but also by investment.” This was written by the ECB in its monthly economic bulletin. The recovery – warns though- “must also overcome the challenges posed by other geopolitical uncertainties.”

The risks on eurozone growth prospects remain so, “tilted to the downside.” Looking ahead, on the basis of current futures prices for energy, “the rate of inflation in the euro area will remain at low levels or maybe even slightly negative in the coming months before recovering later in 2016″. The central bank in Frankfurt said that inflation “is expected to grow in 2017 and 2018″ but that “the outcome of the referendum in the UK has increased the level of uncertainty about the inflation outlook.”
The latest economic indicators, is still read, they are broadly consistent with continued moderate growth in real GDP in the second quarter of 2016. The recovery “continues at a moderate pace, despite the increased uncertainty following the outcome the referendum in the UK, “writes the ECB. The uncertainties related to Brexit – warns that both sides “could affect the climate of confidence and trade.” Stock prices in the euro area have recorded lower after the outcome of the referendum, “While the overall index climbed back later, the index of bank shares remained well below its levels in early June” a decrease which amounted to 13% (the period covered by the report goes from 2 June to 20 July).

The fears on profitability as well as specific events related to individual countries and institutions, have continued to weigh in particular the euro area banking sector, writes the ECB. Market expectations about the volatility of share prices marked “a huge rise” immediately after the referendum in the UK, but have returned to their original level in the remainder of the period. Given the uncertainty, the Governing Council “will continue to follow very closely the economic and financial market developments and to safeguard the transmission

The European Central Bank President Mario Draghi

orientation of its accommodative monetary policy to the real economy. “

lower rates for the coming months but ready to act

the central bank in Frankfurt added that “in the coming months as they become available more information, including new staff projections, the Governing Council will better review the underlying macroeconomic conditions, the most likely trends in inflation and the growth and distribution of risks around these trends. ” However, “if necessary to achieve its objective, the Council will act by using all the tools available within its mandate.”

ECB, positive effects on businesses with corporate bond purchases

For next few months anyway, “continues to expect that the reference interest rates remain at levels equal to or lower than the current for an extended period of time, far beyond the horizon of the net asset purchases” and that the program of purchases of government bonds and individuals who, for now, and ‘expected to expire at the end of March 2017. in terms of QE, confirms “the intention of conducting monthly asset purchases to 80 billion until the end of March 2017, or even beyond if necessary, and in any case until it will experience an evolution lasting adjustment of prices, consistent with its inflation target ‘which is an annual rate close to but below 2%.

(Il Sole 24 Ore Thomson Plus)

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