FRANKFURT, GERMANY: European Central Bank President Mario Draghi has announced a cut in the bank's growth outlook for the 17 countries that use the euro currency.
The bank said the eurozone would shrink 0.6 per cent this year, down from its previous forecast of minus 0.5 per cent.
The ECB nonetheless stuck to its forecast for a gradual recovery starting later in the year. Draghi spoke on Thursday at a news conference after the bank left its key interest rate unchanged at a record low 0.5 per cent.
He said recent surveys of economic optimism had shown improvement and the economy ``should stabilize and recover in the course of the year.''
The eurozone's economy shrank 0.2 per cent in the first quarter, for the sixth straight quarter. Unemployment is at 12.2 per cent, highest since the euro was introduced in 1999. Some data _ such as those on lending to companies _ were downbeat, while others had improved.
The consensus after a ``very rich discussion'' on the bank's 23-member governing council was that there ``wasn't any directional change that would justify taking action at this time,'' Draghi said.
Draghi added that the bank's governing council had discussed a wide range of measures that go beyond interest rates to help stimulate the eurozone economy.
These include lowering its deposit rate for deposits from banks to below zero, steps to use financial markets to increase lending for small businesses, and more central bank lending to banks. But in the end, he said, ``we see no reason to act on all these fronts.These are all measures we keep on the shelf.''
The ECB's key task is to get credit flowing to companies, particularly the small and medium-sized firms that create the most new jobs. Even record low interest rates have not been passed on by banks in the hardest hit parts of the eurozone.
So the ECB is looking at other measures such as encouraging banks to package and sell loans to small businesses, a process that would free up more money to lend.
But that will take time to set up. Draghi held open the door to a rate cut if things worsen, saying that the bank would ``monitor'' very closely how the economy is doing.
indiatimes.com
The bank said the eurozone would shrink 0.6 per cent this year, down from its previous forecast of minus 0.5 per cent.
The ECB nonetheless stuck to its forecast for a gradual recovery starting later in the year. Draghi spoke on Thursday at a news conference after the bank left its key interest rate unchanged at a record low 0.5 per cent.
He said recent surveys of economic optimism had shown improvement and the economy ``should stabilize and recover in the course of the year.''
The eurozone's economy shrank 0.2 per cent in the first quarter, for the sixth straight quarter. Unemployment is at 12.2 per cent, highest since the euro was introduced in 1999. Some data _ such as those on lending to companies _ were downbeat, while others had improved.
The consensus after a ``very rich discussion'' on the bank's 23-member governing council was that there ``wasn't any directional change that would justify taking action at this time,'' Draghi said.
Draghi added that the bank's governing council had discussed a wide range of measures that go beyond interest rates to help stimulate the eurozone economy.
These include lowering its deposit rate for deposits from banks to below zero, steps to use financial markets to increase lending for small businesses, and more central bank lending to banks. But in the end, he said, ``we see no reason to act on all these fronts.These are all measures we keep on the shelf.''
The ECB's key task is to get credit flowing to companies, particularly the small and medium-sized firms that create the most new jobs. Even record low interest rates have not been passed on by banks in the hardest hit parts of the eurozone.
So the ECB is looking at other measures such as encouraging banks to package and sell loans to small businesses, a process that would free up more money to lend.
But that will take time to set up. Draghi held open the door to a rate cut if things worsen, saying that the bank would ``monitor'' very closely how the economy is doing.
indiatimes.com
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