Daily Management Review

The ECB worries about growing euro and trade wars


04/13/2018


At a meeting in March, representatives of the European Central Bank (ECB) expressed concern about the threat of a full "trade war" with the United States and the potential negative consequences of strengthening the euro. This is written by Reuters referring to the minutes of the meeting.



janeb13 via pixabay
janeb13 via pixabay
At a meeting on March 7-8, the ECB unexpectedly abandoned its promise to "increase the size and/or duration of the asset purchase program" if economic conditions deteriorate.

Strengthening of the euro in recent months can partly be explained by concerns about US protectionism, did not lead to a significant reduction in demand. Nevertheless, members of the Board of Governors called the exchange rate "a significant source of uncertainty." Some ECB representatives predict a more negative impact of the euro's growth on inflation.

"There is widespread concern that the risk of trade conflicts, which could be expected to have a negative impact on the economic activity of all involved countries, has increased," the ECB said.

According to Eurostat, the GDP of 19 euro zone countries in the IV quarter of 2017 increased by 0.6% compared to the previous quarter. The growth was fixed for the 19th quarter in a row.

By the end of 2017, in general, the GDP of the euro zone grew by 2.3%, the maximum rate since 2007. Meanwhile, inflation still lags behind the target set at "slightly below 2%." Consumer prices in the euro area in March rose by 1.4% in annual terms, showed preliminary data of Eurostat.

At the meeting, the view was expressed that the ECB is close to meeting its criteria for a steady correction of inflation. However, the members of the Board of Governors agreed that the progress made is still insufficient.

The minutes of the meeting also reflect the increased confidence of ECB representatives that inflation will gradually return to the target level if the regulator shows enough patience.

"Increased confidence requires a gradual adjustment of the Board of Governors' statements," the ECB said.

The next meeting of the central bank will be held on April 26. Members of the Board of Governors will probably discuss how and when they can complete the bond buying program.

source: reuters.com






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