Home news Eurozone set for fastest growth since 2007, says ECB

Eurozone set for fastest growth since 2007, says ECB

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The European Central Bank (ECB) has raised its eurozone economic growth forecast for this year to 2.2%, the fastest growth in 10 years.ECB president Mario Draghi said the 19-country bloc grew faster than expected in the first half of the year.It came as the bank kept eurozone interest rates and its bond buying stimulus programme unchanged following its latest meeting.But analysts expect stimulus measures to be scaled back in the months ahead.The ECB is currently buying 60bn euros of bonds a month as part of its quantitative easing (QE) programme.Mr Draghi said the bank would make a decision in the autumn about future policy changes.Winding down QEThe ECB raised its forecast for GDP growth this year from 1.9% to 2.2%, which would be the fastest growth rate since the 3.0% seen in 2007 before the financial crisis started to bite.Figures released earlier on Thursday confirmed that the eurozone’s economy grew by 0.6% in the three months to June, following growth of 0.5% in the first quarter of the year.However, despite the pick-up in growth, inflation within the eurozone remains slower than the ECB’s target of close to, but below, 2%. Inflation in the 19-nation bloc was 1.5% in August.Has eurozone stimulus done its job?Draghi defends huge stimulus policiesAnalysts say this is making the decision on when the bank begins to rein in QE more complicated.”We think the central bank is trying to send the message that the degree of stimulus will be dialled down as the economy improves, but not removed altogether,” said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics. The ECB kept all its main interest rates unchanged, with the benchmark refinancing rate staying at 0%. The deposit facility rate stayed at -0.4%, which means banks pay money to leave their cash at the ECB.The ECB said it still expected rates to “remain at their present levels for an extended period of time”.
Source: BBC