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Eurozone inflation could pick up says Draghi Eurozone inflation and growth to pick up says Draghi
(35 minutes later)
Eurozone inflation rates are likely to begin a recovery in 2016, European Central Bank (ECB) president Mario Draghi has said.Eurozone inflation rates are likely to begin a recovery in 2016, European Central Bank (ECB) president Mario Draghi has said.
Mr Draghi was speaking after the ECB kept its main interest rate unchanged in a widely expected decision.Mr Draghi was speaking after the ECB kept its main interest rate unchanged in a widely expected decision.
Inflation remains well below the ECB's target but Mr Draghi expects the bank's stimulus measures to boost prices. Inflation, at minus 0.1%, remains well below the ECB's target and policymakers are concerned about falling into a deflationary spiral.
However, he warned that the UK referendum and slower global growth could threaten the region's recovery. But Mr Draghi expects the bank's recent stimulus measures to boost prices.
Stimulus measuresStimulus measures
The bank raised its inflation outlook for 2016 to 0.2% from 0.1% previously, while forecasting economic growth of 1.6%, from 1.4%. The bank raised its inflation outlook for 2016 to 0.2%, from 0.1% previously, while forecasting economic growth of 1.6%, from 1.4%.
Mr Draghi said he expected rates to remain very low or negative in the next few months before edging higher in the second half of 2016.Mr Draghi said he expected rates to remain very low or negative in the next few months before edging higher in the second half of 2016.
"Supported by our monetary policy measures and the expected economic recovery, inflation rates should recover further in 2017 and 2018," he said."Supported by our monetary policy measures and the expected economic recovery, inflation rates should recover further in 2017 and 2018," he said.
The ECB's governing council, meeting in Vienna, said it would hold its benchmark interest rate at 0% and its deposit rate at minus 0.4%.The ECB's governing council, meeting in Vienna, said it would hold its benchmark interest rate at 0% and its deposit rate at minus 0.4%.
Analysts had expected rates to remain unchanged after the bank announced new stimulus measures in March aimed at reviving economic growth in the eurozone.Analysts had expected rates to remain unchanged after the bank announced new stimulus measures in March aimed at reviving economic growth in the eurozone.
Brexit threatBrexit threat
As part of those measures, the ECB said it would start buying corporate bonds on 8 June as part of its €80bn monthly total. Those purchases have mainly been of government bonds until now.As part of those measures, the ECB said it would start buying corporate bonds on 8 June as part of its €80bn monthly total. Those purchases have mainly been of government bonds until now.
The bank hopes the measures will help increase economic activity and bring the eurozone inflation rate closer to the bank's goal of just under 2%.The bank hopes the measures will help increase economic activity and bring the eurozone inflation rate closer to the bank's goal of just under 2%.
Mr Draghi said the stimulus measures were bearing fruit, though subdued economic growth in emerging markets and the UK referendum on the EU could threaten the euro area's recovery.Mr Draghi said the stimulus measures were bearing fruit, though subdued economic growth in emerging markets and the UK referendum on the EU could threaten the euro area's recovery.
"The risks to the euro area growth outlook remain tilted to the downside but the balance of risk has improved on the back of the monetary measures taken and the stimulus still in the pipeline," he told a news conference."The risks to the euro area growth outlook remain tilted to the downside but the balance of risk has improved on the back of the monetary measures taken and the stimulus still in the pipeline," he told a news conference.
"Downside risks continue to relate to developments in the global economy, to the upcoming British referendum and to other geopolitical risks.""Downside risks continue to relate to developments in the global economy, to the upcoming British referendum and to other geopolitical risks."
Boosting employmentBoosting employment
Describing the UK, Europe and the eurozone as "mutually beneficial," Mr Draghi said the ECB was prepared for any outcome when the UK holds the 23 June referendum.Describing the UK, Europe and the eurozone as "mutually beneficial," Mr Draghi said the ECB was prepared for any outcome when the UK holds the 23 June referendum.
"The ECB has a view whereby the UK should remain in the European Union because the European Union will benefit from its permanence and we believe the UK too will benefit from staying in the European Union," he said."The ECB has a view whereby the UK should remain in the European Union because the European Union will benefit from its permanence and we believe the UK too will benefit from staying in the European Union," he said.
He added that reforms to raise productivity and improve the business environment were necessary in all euro area countries. These were essential to increase investment and boost job creation, he said.He added that reforms to raise productivity and improve the business environment were necessary in all euro area countries. These were essential to increase investment and boost job creation, he said.
The eurozone economy expanded by 0.5% in the first quarter, but unemployment remains persistently high at 10.2%.The eurozone economy expanded by 0.5% in the first quarter, but unemployment remains persistently high at 10.2%.
Patrick O'Donnell, investment manager at Aberdeen Asset Management, said Mr Draghi "just about managed" to show his plan was working.
"He's said growth will be OK and the ECB's initiatives are making progress but that more needs to be done," Mr O'Donnell said.
"Once again he's lumped responsibility back at politicians' doors by saying structural reforms should be faster. It's no great surprise, but reassuring, that the ECB is thinking about Brexit amongst other risks."