Eurozone WARNING: Mario Draghi ADMITS euro area economy 'WEAKER than expected'

The ECB chief repeated the bank’s recent economic warning as he expressed concerns that the eurozone’s dip might last longer than earlier feared. Mr Draghi went on to suggest the ECB could be poised to provide more support to the eurozone, just days after announcing the bank would be leaving policy on hold last week. Mr Draghi told the European Parliament’s committee on economic affairs in Brussels: “Over the past few months, incoming information has continued to be weaker than expected on account of softer external demand and some country and sector-specific factors. “The persistence of uncertainties in particular relating to geopolitical factors and the threat of protectionism is weighing on economic sentiment.”

The bank left guidance and interest rates unchanged at its meeting on Thursday, while Mr Draghi suggested growth had shifted to the downside due to a slowdown in China’s economy and political uncertainty from Brexit.

Despite citing risks to the economy, Mr Draghi said he would not be changing monetary policy at present.

He claimed the reason for this was strength of the region’s labour market and rising wage growth, which he said would help push underlying inflation up over the medium term.

Back in December, the ECB ended a landmark €2.6trillion ($3trillion) bond purchase scheme just weeks ago.

The four-year-long quantitive easing scheme programme had seen the ECB top up eurozone cash supply by purchasing millions of euros worth of assets each month.

The amount of assets bought each month was reduced in September to €15billion from €30billion as the scheme began to wind down.

The ECB said it still expected to keep interest rates at record lows “through” the summer, sticking with its long-standing guidance even though markets now see a much later move.

Germany, France and Italy, the eurozone’s biggest economies, are thought to have been three of the biggest problems for the eurozone, which each country barely growing in the fourth quarter of 2018.

Meanwhile, survey data showed on Thursday business activity across the euro zone expanded at the slowest pace since 2013 at the start of this year.

Mr Draghi said on Thursday that the ECB did not see recessions as likely in Germany or Italy.

Even if this is down mostly to one off factors, the resulting drop in business confidence threatens to make the downturn self fulfilling.

Mr Draghi said today: “Significant monetary policy stimulus remains essential to support the further build-up of domestic price pressures and headline inflation developments over the medium term.

“The Governing Council stands ready to adjust all of its instruments, as appropriate”

To prop up confidence, it could offer banks another round of cheap, long-term loans to make sure they continue to lend to the real economy.

source: express.co.uk