LIVE TV
ZEE Business
ZEE BUSINESS
हिंदी में पढ़ें  हिंदी में पढ़ें
Live TV
Live TV
  • Home
  • Budget 2021
  • Personal Finance
    • PPF
    • Mutual Funds
    • Income tax
    • EPFO
    • Income Tax Calculator
    • Personal Loan Calculator
    • Car Loan Calculator
    • Home Loan Calculator
    • SIP calculator
    • SWP Calculator
    • MF Returns Calculator
    • Lumpsum Calculator
  • India
    • Companies
    • Property
    • Startups
    • Uidai
  • Economy
    • Aviation
  • Tech
    • Mobiles
    • Apps
  • Auto
    • Cars
    • Bikes
  • Markets
    • Commodities
    • Currency
  • Jobs
  • Indian Railways
  • World
    • Economy
    • Politics
    • Markets
  • videos
  • photos
  • Authors
  • More ...
    • VIDEOS
    • PHOTOS
Read in App
Business News » World News

ECB gives up on bigger bond buys en route to stimulus exit

  • Twitter
  • Facebook
  • Linkedin
  • whatapp
  • View in App
Updated: Thu, Mar 08, 2018
09:34 pm
Reuters
RELATED NEWS
Infosys Chairman Nandan Nilekani on India's Digital Economy I Kotak Institutional Equities highlights details Infosys Chairman Nandan Nilekani on India's Digital Economy I Kotak Institutional Equities highlights details
Digital economy to outpace GDP growth, will result in 'competitive advantage period' for leaders in digital space highlights ICICI Securities Digital economy to outpace GDP growth, will result in 'competitive advantage period' for leaders in digital space highlights ICICI Securities
#GSTMakeItEasy: Facing GST related issues? Big initiative by Zee Business - Tweet your problems now! Check all details here #GSTMakeItEasy: Facing GST related issues? Big initiative by Zee Business - Tweet your problems now! Check all details here
India’s economy picking up steam, estimate recovery at 10% in FY22: S&P Global India’s economy picking up steam, estimate recovery at 10% in FY22: S&P Global
RBI Monetary Policy: Governor Das says repo rate unchanged, sees GDP at 10.5 pct for FY22, inflation at 5.4 pct for Q4FY21 RBI Monetary Policy: Governor Das says repo rate unchanged, sees GDP at 10.5 pct for FY22, inflation at 5.4 pct for Q4FY21

The European Central Bank dropped a long-standing pledge on Thursday to increase its bond buying if needed, taking another small step in weaning the euro zone economy off its protracted stimulus.

Keeping its broader policy unchanged, the ECB said it could still extend its 2.55 trillion euro ($3.16 trillion) bond purchase scheme beyond September if needed. But it skipped a reference to bigger purchases, a signal that it remains on track to end a three-year-old stimulus scheme before the end of 2018.

Speaking hours before U.S. President Donald Trump was due to impose new steel and aluminium tariffs, ECB President Mario Draghi said the euro zone could even grow faster than now expected and the biggest risks were a global trade war and efforts to ease bank regulation, another U.S. policy initiative.

Having revived euro zone growth with lavish stimulus, the ECB has been dialling back support in tiny increments, fearing that any big change could unravel its work and force an embarrassing and economically damaging policy reversal.

While its efforts are paying off and the ECB actually raised its 2018 growth projection, inflation - its singular mandate - will miss its target for years to come, well past Draghi`s eight-year term, which ends late next year.

"The outlook for growth confirms our confidence that inflation will converge towards our inflation aim of below, but close to, 2 percent," Draghi said. "At the same time, measures of underlying inflation remain subdued and have yet to show convincing signs of a sustained upward trend."

"Our mandate is in terms of price stability. Victory cannot be declared yet," Draghi told a news conference.

Dropping its ECB`s so-called easing bias was largely symbolic as few if any expected bigger bond buying. Even Draghi called the move a "backward-looking measure".

But the change, a unanimous decision, was still seen as a precursor to a broader revision of the bank`s policy guidance, a move flagged in earlier meetings and now seen coming closer to the summer months.

"Although (the change) signals little in itself, it re-affirms the direction of travel," Neville Hill, an economist at Credit Suisse said.

"Unless there is a material slowdown – which we do not expect – then we anticipate further such shifts in language and tone in the coming months,"

The euro, which initially gained on the ECB`s decision, slid after Draghi`s news conference to trade down 0.5 percent at $1.2352 by 1520 GMT.

Growth is now seen at 2.4 percent this year, up from 2.3 percent seen in December, with projections for 2019 and 2020 unchanged at 1.9 percent and 1.7 percent respectively.

"Incoming information, including our staff projections, confirms the strong and broad-based growth momentum in the euro area economy, which is projected to expand in the near term at a somewhat faster pace than previously expected," he said.

Draghi nonetheless cited "rising protectionism" as a risk and while judging any direct impact from U.S. tariffs on steel and aluminium to be limited, said any U.S. move would add more generally to concerns over international relations.

"If you put tariffs against (those) who are your allies, one wonders who the enemies are," he said.

The European Union has said it would retaliate immediately against any U.S. tariffs, which are based on a 1962 U.S. law allowing such measures for "national security".

Draghi warned that tariffs lead to retaliation which lead to currency volatility and economic uncertainty, potentially complicating its decision.DICHOTOMY

The dichotomy facing the ECB is that while growth has blown past expectations, inflation remains weak, having hit a 14-month low in February. Indeed, Draghi said inflation would hover around 1.5 percent for the rest of this year and even in 2020 only rise to 1.7 percent.

While the bloc`s five-year growth run and a rapid drop in unemployment suggest that inflation will eventually rise, this rebound has taken many years more than expected and the rising euro could put a lid on price growth.

Launched amid fears of deflation, the ECB`s quantitative easing scheme depressed borrowing costs and induced firms to borrow and invest. While the deflation threat is long gone, the euro`s volatility risks derailing the bank`s efforts.

Indeed, while economists polled by Reuters expect bond buying to conclude at the end of this year, a first interest rate increase is expected only in the second quarter of 2019.

With Thursday`s policy decision, the ECB`s benchmark deposit rate will stay at minus 0.4 percent and the main refinancing rate, the main policy benchmark during normal times, at 0.00. Asset buys are set to continue at 30 billion euros per month.

($1 = 0.8072 euros)

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)

Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.

TAGS:
Economy
RELATED NEWS
Infosys Chairman Nandan Nilekani on India's Digital Economy I Kotak Institutional Equities highlights details Infosys Chairman Nandan Nilekani on India's Digital Economy I Kotak Institutional Equities highlights details
Digital economy to outpace GDP growth, will result in 'competitive advantage period' for leaders in digital space highlights ICICI Securities Digital economy to outpace GDP growth, will result in 'competitive advantage period' for leaders in digital space highlights ICICI Securities
#GSTMakeItEasy: Facing GST related issues? Big initiative by Zee Business - Tweet your problems now! Check all details here #GSTMakeItEasy: Facing GST related issues? Big initiative by Zee Business - Tweet your problems now! Check all details here
India’s economy picking up steam, estimate recovery at 10% in FY22: S&P Global India’s economy picking up steam, estimate recovery at 10% in FY22: S&P Global
RBI Monetary Policy: Governor Das says repo rate unchanged, sees GDP at 10.5 pct for FY22, inflation at 5.4 pct for Q4FY21 RBI Monetary Policy: Governor Das says repo rate unchanged, sees GDP at 10.5 pct for FY22, inflation at 5.4 pct for Q4FY21

LATEST NEWS

How these traits can ease investment journey

Post Office Schemes: Good news for savings account holders! Withdrawal limit hiked from Rs 5,000 to Rs 20,000 at these branches

TMC Candidates List 2021 - Names of 291 candidates announced for West Bengal Elections; See Complete List Here

Aadhaar card-based driving licence service: Check step by step guide to renew your driving licence online without going to RTO

NEET 2021 exam: Check here the latest update on dates and all you need to know for registration before appearing in the test

Trinamool candidate list West Bengal Election 2021: TMC chief Mamata Banerjee announces candidates for 291 seats, to contest from Nandigram; See FULL LIST

Call of Duty Mobile vs Garena Free Fire comparison: Here's all you need to know about these battle royale games

CBSE Class 10, Class 12 date sheet revised—check new time table, instructions here

7th Pay Commission latest news today: Big Holi gift for Central government employees! Center issues this notification on 7th CPC leave rule

Indian economy outlook 2021: This is why FY 2021 GDP performance will be better than projection—Finance Ministry EXPLAINS

  • India News
  • World News
  • Companies News
  • Market News
  • Personal Finance News
  • Technology News
  • Automobile News
  • Small Business News
  • Income Tax Calculator
  • Live TV
  • Videos
  • Photos
  • Author
  • Rss Feed
  • Advertise with us
  • Privacy Policy
  • Legal Disclaimer

Latest Trending Updates

  • EPFO
  • Budget 2020
  • Income Tax Return
  • Auto Expo 2020
  • Home Loan
  • Business News

Trending Topics

  • Income Tax
  • income Tax Calculator
  • 7th Pay Commission
  • Reserve Bank of India
  • GST
  • Latest Business News

Follow us on

zeebiz
zeebiz

Partner Sites

  • Zee News
  • Hindi News
  • Marathi News
  • Bengali News
  • Tamil News
  • Malayalam News
  • Gujarati News
  • Telugu News
  • Kannada News
  • DNA
  • WION
Copyright © Zee Media Corporation Ltd. All rights reserved