JAKARTA (TheInsiderStories) — European Central Bank (ECB) seems to be a little despondent over the world’s economy. Taking a prudent step, the Bank decided to maintain its recent interest rate on the marginal lending facility and the deposit facility at 0.00 percent, 0.25 percent, and -0.40 percent respectively.
It will be remain unchanged at least until summer of 2019, based on the first ECB meeting this year. But once ECB starts raising rates, Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the asset purchase programme for an extended period.
President of ECB Mario Draghi realised, there’s a softer external demand, amid uncertainties in geopolitical factors. He also mentioned about the protectionism threat that’s weighing on economic sentiment.
Euro GDP grew 0.2 percent quarter on quarter. Draghi estimated a weaker growth as a result of a slowdown in external demand compounded by some country and sector-specific factors. But he highlighted that the condition won’t last long.
He has confidence over China’ economy will rebound after the slowdown, due to trade war with the United States (US). Moreover, Chinese government is taking strong measures to address the slowdown.
Other than that, he claimed that Brexit will not affect European Union economy much. He also estimated that Germany’s car industry slump will revive. And ECB, will keep assessing all the risks to take another measure in tackling the problems.
“At the same time, supportive financing conditions, favourable labour market dynamics and rising wage growth continue to underpin the euro area expansion and gradually rising inflation pressures” said Draghi in a written statement yesterday (01/24).
He added, “This supports our confidence in the continued sustained convergence of inflation to levels that are below, but close to two percent over the medium term.”
In December 2018, Euro area annual inflation was 1.6 percent. The figure declined from 1.9 percent in November, reflecting mainly lower energy price inflation.
With the projection of future oil price, inflation is likely to decline further over the coming months. But underlying inflation is expected to increase over the medium term, supported by Europe monetary policy measures, the ongoing economic expansion, and rising wage growth.
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