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| Subject: ECB chief upbeat economic recoveryFriday September 4, 2009, 7:56 amEuropean Central Bank chief gave | |
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Author: an upbeat outlookfor global economic growth on Thursday |
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Date Posted: 15:19:36 09/03/09 Thu ECB chief upbeat on economic recovery Friday September 4, 2009, 7:56 am The European Central Bank chief gave an upbeat outlook for global economic growth on Thursday but stressed the need for caution and warned the road to recovery could be bumpy. "There are increasing signs of stability in economic activity in the euro area and elsewhere," ECB president Jean-Claude Trichet told media after the bank's governors decided unanimously to hold its benchmark interest rate at an all-time low of 1.0 per cent. "This is consistent with the expectation that the significant contraction in economic activity has come to an end and is now followed by a period of stabilisation and very gradual recovery," he added, essentially declaring an end to the eurozone's first recession. Trichet said the eurozone might post economic growth sooner than previously forecast in mid-2010, but added: "I don't exclude a bumpy road" with a quarter of growth followed by "a less flattering evolution the next quarter." He stressed that "it's not time today" to consider so-called exit strategies or the unwinding of exceptional measures taken by the ECB and other central banks to spur economic activity. A tranche of unlimited one-year loans to be allotted on September 30 would be made at the benchmark rate, Trichet said, a sign the ECB did not intend to tighten monetary policy in the near future. His comments suggested that "the bank is likely to keep interest rates at 1.0 per cent deep into 2010," IHS Global Insight's chief European economist Howard Archer commented. Elsewhere, Sweden's central bank left its main lending rate at a record low of 0.25 per cent, and issued improved forecasts for the Swedish economy. In Frankfurt, Trichet unveiled the latest forecasts by ECB staff for growth and inflation, revising the overall outlook higher though the midpoint of a range for 2009 still had the 16-nation economy contracting by 4.1 per cent. For 2010, the midpoint stood at a positive 0.2 per cent, which Goldman Sachs economist Erik Nielsen called "amazingly bearish" even though it was a marked upward revision from the minus 0.3 per cent made in June. Earlier Thursday, the OECD had signalled that the eurozone and US economies should emerge from recession in the third quarter of this year. Trichet emphasised however that "uncertainty remains high and the persistent volatility in incoming data warrants a cautious interpretation of available information. "Overall, the recovery is expected to be rather uneven," he warned. Inflation was now estimated to come in at 0.4 per cent this year and 1.2 per cent in 2010, a slight hike from June estimates but still well below the ECB's medium-term target of 2.0 per cent. The increase in growth forecasts came amid mounting signs that the eurozone was recovering from its first recession. The economy shrank in the second quarter but by just 0.1 per cent, official EU statistics showed on Wednesday. That decline was the fifth consecutive quarter of falling economic output but marked a huge improvement from a record 2.5 per cent plunge in the first three months of the year. Another survey, the closely watched purchasing managers index (PMI) published Thursday, suggested that eurozone business activity expanded in August after 15 months of declines. The OECD raised its own 2009 estimate of eurozone economic activity to minus 3.9 per cent, having previously forecast a contraction of 4.8 per cent. But while things were looking better for the eurozone and a battered global economy in general, Trichet said "a lot of work remains to be done" as the Group of 20 leading economic powers prepared for a summit in the US city of Pittsburgh. "The worst possible attitude would be... business as usual" just because financial markets had begun to recover and economic indicators were starting to point upwards, he stressed. [ Next Thread | Previous Thread | Next Message | Previous Message ] |