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ECB May End Stimulus Program in Late 2018

ECB May End Stimulus Program in Late 2018ECB May End Stimulus Program in Late 2018

Growth and inflation forecasts were raised for the eurozone by the European Central Bank Thursday but it resisted any temptation to follow the United States and lift interest rates.

Mario Draghi, the ECB president, also stuck to his pledge to provide economic stimulus until next September or longer if needed, predicting that inflation would remain below his target of almost 2% into 2020, news outlets reported.

There had been some pressure to follow the lead of the US Federal Reserve after its rate rise this week but Draghi indicated that there would be no such move from Frankfurt before 2019.

Economic growth in the eurozone was expected to hit 2.4% this year, 2.3% next year and 1.9% in 2019, Draghi said, although he predicted that inflation would nudge up to 1.7% by 2020.

“All in all, the revision of the macroeconomic projections is going in the right direction,” he said after an ECB board meeting that left the key interest rates unchanged.

“Even though the situation on growth has improved and will continue to improve . . . the news on inflation remains somewhat muted,” Draghi said. This required “ample” stimulus, he added in what amounted to a “steady as she goes” view after the decision six weeks ago to halve the ECB’s huge monthly bond-buying budget to €30 billion ($35.4 billion) but extend it to at least next September.

Inflation will stay below the ECB’s target, easing from 1.5% this year to 1.4% next year, he said.

Having faced five years of anaemic price pressures, the ECB has deployed its entire policy arsenal, cutting interest rates into negative territory, giving banks cheap loans and spending an unprecedented €2.55 trillion on bond purchases.

The eurozone recovery is well into its fifth year but only now is the ECB indicating an end to the stimulus program towards the end of next year. 

Meanwhile, a bigger rise in imports than in exports left the eurozone’s goods trade surplus a little slimmer in October than in the same period in 2016, according to data released on Friday.

The surplus clocked in at €18.9 billion in October 2017, from €19.2 billion in the same period last year, according to data from Eurostat, the bloc’s statistics agency.

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