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ECB still sees risks to economic recovery

Apr 04 2012 15:01 Reuters

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Frankfurt - There is a risk economic stabilisation in the eurozone could falter while prices are not likely to fall below their 2% inflation target until next year, the European Central Bank (ECB) said on Wednesday.

“The economic outlook remains subject to downside risks,” ECB president Mario Draghi said, reading the central bank’s opening statement after it held interest rates at a record low of 1.0%.

“Downside risks to the economic outlook prevail,” he said.

The ECB kept its economic assessment largely similar to the previous month, after several months of tweaking the language in a brighter direction.

Draghi also said the Governing Council views medium-term inflation risks as balanced, but with more danger of a rise than a fall this year. The central bank aims to keep inflation at just below 2% but has overshot the target for 16 months in a row.

The opening statement also said the ECB’s non-standard measures - which include handing banks 1 trillion euros in three-year loans - are temporary, but made no mention of when they would be phased out.

Bundesbank President Jens Weidmann has pushed for the ECB to start discussing an exit from these measures.
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