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Euroland Progress Linked to Global Growth, Open Trade

Euroland Progress Linked to Global Growth, Open TradeEuroland Progress Linked to Global Growth, Open Trade

The eurozone’s economy needs strong global growth and open trade if it is to continue to prosper, the European Central Bank’s President Mario Draghi said on Friday.

“The positive developments in euroland are not independent of the global growth momentum,” Draghi told central bank governors and ministers on the International Monetary and Financial Committee in Washington, Reuters reported.

“Open trade, investment and sustainable financial flows play a key role in the cross-border diffusion of new technologies that drive forward efficiency improvements,” he added.

ECB policy makers see scope to wait until their July meeting to announce how they’ll end their bond-buying program, according to eurozone officials familiar with the matter.

Governing council members want sufficient time to judge if the economy is overcoming its first-quarter slowdown, the officials said, asking not to be identified because the internal deliberations are confidential. That could mean the June meeting, which would have the advantage of linking the decision to updated economic forecasts, might be too soon.

Some governors don’t see any need to change the ECB’s guidance on interest rates at the same time, arguing that they can afford to wait to see how the market reacts to the announcement of an end-date for quantitative easing, though not everyone agrees. The officials said there have been no formal discussions at all on a strategy for rates.

An ECB spokesman declined to comment. The euro briefly dropped to the lowest level in two weeks, and was down 0.5% at $1.228.

Draghi acknowledged the region’s slowdown, but maintained his optimism that the expansion will continue. “Notwithstanding the latest economic indicators, which suggest that the growth cycle may have peaked, the growth momentum is expected to continue,” he said.

He’ll hold a press conference on April 26 after the governing council next sets policy, though there are few expectations for any shift then. Economists surveyed by Bloomberg this week pushed out their estimates of when the council will take its next steps toward normalization. 

Just 36% predict a decision to end QE will be taken in June, down from almost half in last month’s poll. About a quarter of respondents foresee the announcement in July and a similar proportion forecast in September.

 

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