Risks to euro zone growth have declined further and the European Central Bank will be in position at its June 8 meeting to reassess the outlook for growth and inflation, ECB President Mario Draghi said on Monday.
“Downside risks to the growth outlook are further diminishing, and some of the tail risks we were facing at the end of last year have receded measurably,” Draghi told the European Parliament’s committee on economic affairs.
Still, he warned that underlying inflation pressures remained subdued, particularly because of low wage growth, so “fairly substantial” amount of monetary accommodation is still needed.
The ECB has long argued that even with growth picking up, inflation is weak and far from sustainable, requiring the bank to maintain is unprecedented level of stimulus, which includes 2.3 trillion euros ($2.57 trillion) of asset buys and keeping rates in negative territory.
Policymakers are expected to declare risks to growth balanced when they meet next month, giving up their long-standing, more negative assessment, and may even discuss removing their bias for further rate cuts and even bigger asset purchases.
But any change in the bank’s tone is likely to be incremental as some policymakers fear that a bigger move could touch off market turbulence, raising expectations for a more aggressive removal of stimulus.
The next big decision for the bank may not come up until the autumn, when it has to decide whether to extend its bond purchase program into next year or start winding it down as now scheduled.
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