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--Inflation Converging Towards Medium Term Aim, But Risks Remain
By Christian Vits
FRANKFURT (MNI) - European Central Bank President Mario Draghi Wednesday
reiterated the bank's dovish stance on monetary policy as he did after the last
policy meeting on March 8, pointing on economic risks and lagging inflation.
"We currently see inflation converging towards our aim over the medium
term, and we are more confident than in the past this convergence will come to
pass" Draghi told an ECB-organised conference in Frankfurt.
"But we still need to see further evidence that inflation dynamics are
moving in the right direction. So monetary policy will remain patient,
persistent and prudent," he underlined.
While Draghi also stressed that the economy has been growing consistently
above current estimates of potential growth and more than previously expected,
he explicitly noted two risks for the growth and inflation outlook.
"The first risk relates to the global environment, and in particular
possible spill overs of the new trade measures announced by the US
administration," Draghi said. The second risk relates to developments in foreign
exchange markets and wider financial markets, he added.
If they intensify they could reduce the ECB's "confidence in the inflation
path". What's more, the adjustment in inflation has to be self-sustained even
without additional net asset purchases, Draghi stressed.
Offering little new to the ECB Watchers gathered to hear him speak, Draghi
underlined the fact the ECB remains very cautious before further adjusting its
monetary policy. The bank will conduct monthly asset purchases of E30 billion
until September -- and some observers expect a possible extension until the end
of the year, although at a slower pace.
Once again, Draghi noted possible risks stemming from financial markets and
he mentioned the equity market turbulence in February. He said that the spill
over to other asset classes had been moderate.
Still, "should there be any further sharp re-pricing in financial markets,
we will need to monitor the consequences carefully," Draghi said.
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