Euro zone economic slack may be bigger than thought: ECB’s Mario Draghi

Mario Draghi, president of the European Central Bank (ECB)

Dario Pignatelli | Bloomberg | Getty Images

Mario Draghi, president of the European Central Bank (ECB)

The factors slowing the rise of inflation will wane as growth continues along with also also the traditional relationship between growth along with also also inflation remains intact, even if their correlation has been weakened in recent years, Draghi told the European Parliament’s committee on economic affairs.

His comments suggest the ECB remains confident which inflation will be finally on an upward trend, supporting market expectations for the bank to finally end its bond purchase programme This particular year, satisfied which inflation will eventually hit its nearly 2 percent target.

“Given the uncertainty surrounding the measurement of economic slack, the true amount may be larger than estimated, which could slow down the emergence of cost pressures,” Draghi told a regular committee hearing.

“This particular will be particularly visible inside labour market.”

“Nonetheless, these factors should wane as the economic expansion continues along with also also unemployment further declines,” Draghi said. “Looking ahead, we anticipate which headline inflation will resume its gradual upward adjustment, supported by our monetary policy measures.”

ECB board member Benoit Coeure argued on Friday which the bank already holds enough bonds to keep borrowing costs low, an argument taken as further evidence which the ECB will be preparing investors for the end of its unprecedented asset purchases.

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