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Draghi Says Euro Area is Making Steady Progress

By:
Peter Taberner
Updated: Nov 12, 2015, 13:13 UTC

European Central Bank (ECB) President Mario Draghi, has said that the euro  is “progressing moderately”, in is latest speech to the Economic and Monetary

Draghi Says Euro Area is Making Steady Progress

European Central Bank (ECB) President Mario Draghi, has said that the euro  is “progressing moderately”, in is latest speech to the Economic and Monetary Affairs Committee at the European Parliament.

He went on to praise the euro area for showing  resilience in the face of outside influences, which can have an adverse effect on demand.

Although Draghi admitted that demand externally had been reduced, while euro area exports and market share had increased.

The ECB president highlighted that low energy costs, alongside monetary policy which is supporting consumption, and new capital formation, have all been drivers of euro area growth.

However, he also pinpointed the negative aspects of the current economic climate, highlighting visible risks from global growth and trade.

Draghi Says Euro Area is Making Steady Progress
Draghi Says Euro Area is Making Steady Progress

No Turnaround in Core Inflation

Due to the protracted weakness of the euro area, Draghi believes that this is continually weighing down wage growth.

This could moderate price pressures, and so far there is little sign of fortunes being reversed for current core inflation trends.

Lower oil prices Draghi explained has been a factor in low inflation, and the delay in the effects of the generally stronger exchange rates for the euro, while produce prices have remained subdued.

However, Draghi opined that a gradually strengthening recovery will underpin the inflationary process.

Efforts to assess and review risks to price stability will be redoubled , looking at the factors that are continuing to keep inflation lower than the ECB’s 2% target.

The latest inflation figures for the euro area released by Eurostat last month, revealed that euro area inflation figures for October are at 0.0%, a slender rise from the deflationary -0.1% for September.

Euro area annual inflation, October 2015, % 

1

Monetary Policy to be Reviewed

 

Draghi also promised that monetary policy will be reviewed at the December monetary policy meeting.

 

The monetary policy stimulus that has been achieved will be examined, and if it’s decided that there is room for more monetary stimulus, then further options will be discussed.

 

Fitch Say Emerging Markets Seen as Risk from European Credit Investors

 

European Credit investors have grown more bearish on emerging markets, and now see them as the biggest risk in the credit markets in Europe, Fitch Ratings revealed.

 

The rating agency said that if the investors believe that the risk is mitigated if the emerging market country is comparatively stable, and if selected sectors can provide equity returns at a reasonable level.

 

Although 59% of respondents to the survey, said the risk posed over the next 12 months by adverse developments in one or more emerging markets was high, up from 45% in Fitch’s previous survey in July.

 

Breaking down the survey, 29% of respondents see low commodity prices as the main risk to emerging markets.

 

This is followed by slower global growth (26%), a Federal interest  rate rise (24%), and high debt levels (21%).

 

The view that emerging market corporates face a huge refinancing challenge has risen significantly, with 63% of respondents saying that this is the case, up from 46% in our previous survey.

 

Euro in Dollar Recovery

 

This morning the euro hiked up to 1.072 against the dollar, after falling to the 1.07 level. Still a long way down from the 1.078 rate the euro reached in the early hours of today.

 

Compared to the UK pound, the euro has climbed to 0.706, after falling below the 0.705 mark, but the euro rose to just under 0.708, just after 6am. 

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