Published: Fri, April 27, 2018
Finance | By Kristine Clayton

ECB's Draghi warns over eurozone slowdown, trade war risk

ECB's Draghi warns over eurozone slowdown, trade war risk

In the press conference Mario Draghi announced the governing council's message was for "caution tempered by an unchanged confidence that inflation will converge to our inflation target over the medium-term but that confidence is conditional on an accommodative monetary policy framework being in place".

Only two more meetings remain before September.

Draghi said risks related to the threat of protectionism had become "more prominent" but stressed the bank was confident that it was on the right track towards gradually weaning the economy off an unprecedented period of stimulus.

Berlin officials are doubtful that the White House will extend the current exemption enjoyed by the European Union on United States steel and aluminium tariffs beyond a deadline on Tuesday.

Nor was it clear yet whether the restrained economic expansion of Q1 was due mainly to supply constraints such as was evidenced by the problems with lack of skilled labour in the construction industry or a possible softening in demand as a result of signs of falling orders in manufacturing.

"What is certainly known is that the events have a profound and rapid effect on confidence, and confidence can in turn affect the growth outlook", he said.

He also said the ECB's support to the economy was still needed and the central bank would reinvest bonds. Draghi gave no indication of a change unwinding the program during Thursday's news conference.

The ECB governing council at its meeting today decided that the interest rate on the main refinancing operations, the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00 per cent, 0.25 per cent and (-) 0.40 per cent respectively.

Austrian Governor Ewald Nowotny called for a debate on what the European Central Bank will do after quantitative easing runs out in September, according to the people, who asked not to be identified because Governing Council sessions are confidential.

A stronger euro would cap inflation, a headache for the ECB as price growth is already set to miss its near 2%target, the central bank's sole policy objective, for years more to come.

Annual inflation in the currency bloc rose to 1.3% in March, from 1.1% in February, according to data released last week.

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