European Central Bank policymakers expressed confidence in the Eurozone’s growth prospects last month and in easing of the trade tensions between the US and China.
The 22-23 January policy meeting of the ECB’s governing council resulted in a cautiously optimistic note as inflation pressures started to build and risks to growth receded. The meeting was held after the US and China had agreed phase one of trade talks, but before the estimation of the scale of the coronavirus impact on the economy.
“The trade agreement appeared to be the most significant, as it had helped consolidate the general improvement in market sentiment that had gained momentum in early September 2019”, the ECB said about the Phase One deal.
“It was felt to be important to acknowledge these positive signs and care should be taken to avoid being too slow to change the risk assessment. However, some caution was also expressed about becoming too optimistic”, the accounts of the meeting showed.
ECB policymakers have been optimistic about the developments mirroring the ECB’s projections, in which previously growth and inflation were overestimated. Optimism was also expressed over the continued upward trend in some indicators of underlying inflation.
“Incoming economic data and survey information pointed to some stabilisation in euro area growth dynamics. Near term growth was expected to be similar to rates observed in the previous quarters”, the ECB said.
Some policymakers expressed concerns about imbalances, in particular about the rise in equity prices, as well as about the insufficient local measures over high housing prices that could make the financial system more vulnerable. Economists are to meet again on 12 March.
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© ECB - European Central Bank
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