“The risks surrounding the expected expansion are clearly on the downside,” Draghi said in his quarterly testimony to European lawmakers in Brussels today. “Recent indicators gave no indication that the sharp decline” in economic activity in the currency bloc has stopped, he said.
Economic activity in the euro area has slowed and there’s a risk of a further downturn, European Central Bank President Mario Draghi said.
Draghi signaled this month that he intends to expand the ECB’s balance sheet by about 1 trillion euros ($1.29 trillion) with stimulus measures such as targeted long-term loans for banks and an asset-purchase program. Officials are unanimous about embarking on further action if needed to stave off the threat of deflation in the 18-nation currency bloc, he said.
“We expect inflation to remain at low levels over the coming months before increasing gradually in 2015 and 2016,” he reiterated today. Policy makers will “focus in particular on repercussions of damped growth dynamics” and “closely monitor risks to price stability,” he said.
Figures last week showed that euro-area inflation held at 0.4 percent in August, the weakest pace in almost five years. That compares with the ECB’s goal of just below 2 percent. The central bank expects annual euro-area inflation rates of 0.6 percent in 2014, 1.1 percent next year and 1.4 percent in 2015.