MNI POLICY: Euro Area In Moderate Expansion, Mersch Says

By Luke Heighton

     FRANKFURT (MNI) - The euro area economy is expected to continue on its path

of moderate economic expansion, with global factors the main threat to

broad-based growth, ECB executive council member Yves Mersch said on Wednesday.

     Speaking at an MNI Connect round table in Singapore, Mersch reiterated that

despite negative comparisons with 2017, the eurozone was also on course to

achieve the ECB's target inflation rate of below, but close to, 2% over the

medium term.

     Here are main points from his remarks:

     -- While the external environment is less favourable, the underlying

strength of the euro area economy is expected to persist on account of strong

domestic demand dynamics.

     -- Risks to growth remain broadly balanced, but those related to global

factors, including the threat of increased protectionism, the finalisation of

the Brexit negotiations and vulnerabilities in emerging markets are gaining

prominence.

     -- While measures of underlying inflation remain generally subdued, they

are increasing from previous lows. As the labour market continues to tighten

this should lead to higher nominal wage growth, which in turn should support

underlying inflation.

     -- The medium-term increase in inflation the ECB predicts is based on the

premise of quite some degree of monetary policy accommodation.

--MNI London Bureau; +44208-865-3829; email: Jason.Webb@marketnews.com

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