Mario Draghi talks down eurozone recovery
ECB president 'cautious' about growth as he seeks to send dovish message on rates
The president of the European Central Bank, Mario Draghi, yesterday moved to dampen enthusiasm about the health of the eurozone despite the 17-nation bloc's emergence from recession earlier this year.
"I'm very, very cautious about the recovery. The shoots are very green," Mr Draghi said at his monthly press conference in Frankfurt. The Italian central banker added: "Risks continue to remain to the downside."
The ECB left its main refinancing rate on hold yesterday, and Mr Draghi signalled that he would be prepared to take action if money markets were to continue to tighten across the eurozone, jeopardising growth.
"We will remain particularly attentive to the implications that these developments may have to the stance of monetary policy" he said.
Like the Bank of England, Mr Draghi is trying to make it clear to financial markets that he will keep base rates low until the recovery is firmly established.
He said yesterday that monetary policy would "remain accommodative for as long as necessary". Mr Draghi's comments sent the euro about half a cent lower against the dollar to $1.31, a six-week low.
The ECB also yesterday forecast that the eurozone economy would decline by 0.4 per cent in 2013, having estimated a 0.6 per cent decline in June. But the central bank downgraded its 2014 forecast from 1.1 per cent previously to 1 per cent.
The eurozone emerged from an 18-month recession in the second quarter of 2013, with GDP growth of 0.3 per cent, but unemployment across the bloc remains at 12.1 per cent. In some of the peripheral states such as Spain and Greece, more than a fifth of the workforce is unemployed.
Meanwhile, the Bank of England fulfilled the expectations of City traders yesterday by keeping its monetary stimulus programme on hold, despite a tightening of UK money market rates in recent months.
The new Governor, Mark Carney, said last week that the Bank would consider injecting more stimulus into the economy if financial conditions tightened and posed a threat to the recovery. But the Monetary Policy Committee refrained from adding to its £375bn gilt purchase programme.
Like the ECB, the MPC also kept interest rates at their historic lows of 0.5 per cent. The Bank has said it will keep the base rate at this level until unemployment falls to at least 7 per cent of the workforce, something it does not anticipate occurring until the second half of 2016.
But traders are pricing in a rate rise earlier than this, with many believing that a hike will come by the middle of 2015.
Ten-year gilt yields have also been steadily rising since Carney unveiled his policy of "forward guidance" on rates last month. Yesterday they climbed above 3 per cent for the first time since July 2011, although the Bank is more concerned with shorter-term money-market rates.
- 1 Forget 'The Dress': Here are five of the biggest news stories you might have missed
- 2 The black and blue dress: Makers considering a white and gold version
- 3 PornHub turns masturbation into energy in bid to save the planet
- 4 The remarkable archaeological underwater discovery that could open up a new chapter in the study of European and British prehistory
- 5 Saudi Muslim cleric claims the Earth is 'stationary' and the sun rotates around it
Boris Nemtsov shot dead: Outspoken Putin critic who had expressed fears for his life is killed near the Kremlin
PornHub turns masturbation into energy in bid to save the planet
Ukraine crisis: Top Chinese diplomat backs Putin, says West should 'abandon zero-sum mentality'
White and gold or blue and black – what colour is the dress? An eyewitness gives a definitive answer
Saudi Muslim cleric claims the Earth is 'stationary' and the sun rotates around it
New theory could prove how life began and disprove God
Half of Ukip voters say they are prejudiced against people of other races
This is what it's like to be dead, according to a guy who died for a bit
'Cash for access' scandal: Sir Malcolm Rifkind says 'unrealistic' for MPs to live on £67,000 salary
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Aqsa Mahmood branded a 'disgrace' by her parents after claims she recruited three UK girls flying to Middle East
iJobs Money & Business
£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...
£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...
£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...
£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...