MNI SOURCES: Concern In ECB That Slow Growth Is "New Normal"

     LONDON (MNI) - As the European Central Bank prepares to cut macroeconomic

forecasts, some of its top officials are concerned that a slowdown in growth

might be a taste of a "new normal" in which the potential for expansion is

permanently lower, eurosystem sources told MNI.

     "This has been part of the Governing Council's discussions for a very long

time now, but on the other hand most governors are very reluctant to draw

structural monetary policy conclusions on that basis," one official said, when

asked about the possibility that economic growth might have shifted to a

permanently lower gear. But the official added: "Nobody is saying we have to

live with negative rates for a very long time or change the inflation target.

That's not part of the official discussion - some of them say this outside the

circle - but it's not part of the discussion in the Governing Council."

     Another eurosystem official told MNI of similar concerns.

     "My personal view is definitely in that direction - some kind of new normal

which is not, let's say, the Japanese macroeconomic norm, but still lower than

what we've been used to," the official said. "Nobody is going to stick their

head above the parapet and say that, however. There was this hope of

normalisation from a historical perspective, which was also rekindled by the

U.S. rebound, but it's not very convincing that it's sustainable."

     Meanwhile, the ECB is about to lower its growth forecasts in its

macroeconomic projections at its March meeting, sources said. The European

Commission's winter forecast saw eurozone growth at 1.3% in 2019, down from a

projection of 1.9% made in autumn last year. ECB President Mario Draghi recently

told eurozone finance ministers that he "concurred with the new Commission

economic forecasts and indicated that the ECB would be going in the same

direction," another eurosystem source told MNI.

     An ECB spokesman declined to comment on the subject.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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