Draghi: inflation not affected

ECB warns 'serious risks' for Eurozone

GMT 16:34 2012 Friday ,15 June

Arab Today, arab today ECB warns 'serious risks' for Eurozone

European Central Bank chief Mario Draghi
Brussels - Agencies

European Central Bank chief Mario Draghi European Central Bank chief Mario Draghi fuelled speculation Friday of an imminent rate cut, warning of "serious downside risks" to the euro area economy while inflation is no threat. "There are serious downside risks," Draghi told a conference of ECB watchers here.
"They have mostly do with heightened uncertainty," the ECB chief said.
While the bank's own baseline scenario -- reflected in its latest updated economic forecasts published last week -- was unchanged for economic activity to stabilise at very low levels, "we've had a string of negative survey data" since then, Draghi said.
In addition, there was "no inflation risk in any euro area country," Draghi continued.
"Financial market-based inflation expectations over a 10 year horizon are consistent with our definition of medium-term price stability. And should risks to price stability emerge, the euro system of central banks has sufficient tools at its disposal to absorb excess liquidity," he said.
Even in times of crisis, the ECB sees its overriding mandate as keeping a lid on inflation in the 17 countries that share the euro.
Since the outbreak of the crisis, it has cut interest rates to historic lows of 1.0 percent and also embarked on a number of special crisis measures.
But markets have begun to speculate on further rate cuts as the eurozone crisis deepens, with most ECB watchers predicting a move at the bank's policy meeting next month.
Draghi's latest comments "are overall dovish, signalling that the ECB is on 'alert' as the economic conditions have clearly deteriorated since the recent ECB staff projections," said Newedge Strategy analyst Annalisa Piazza.
"In addition, Draghi clearly states that no eurozone country has inflation risks at the current juncture, implying that the ECB has room to act any time."
At the conference on Friday, Draghi also said Europe's policymakers would make known their vision for the euro area -- which is vital to reassure markets and the bloc's citizens -- very soon.
Draghi said he was "in close contact with EU president Herman Van Rompuy, EU Commission chief Jose-Manuel Barroso and the head of eurozone finance ministers Jean-Claude Juncker to reflect on elements of a longer-term vision for our economic and monetary union."
The four have been tasked with forming a "masterplan" for the eurozone's future.
Asked when the outcome of those deliberations would be made public, the Italian replied: "Very soon. All the work we're doing is with a view to the next summit" at the end of June.
"The outcome will get to be known pretty soon, in a matter of days," he added.
At the current time of crisis and financial turmoil, the idea that 17 countries "share a common path and a common objective is already a big achievement," Draghi said.
"Markets and people needed to be assured that we're travelling together." In recent weeks, Draghi has repeatedly called on European leaders to sketch out a vision of how the euro will work in the future and last week said he expected clarification of this vision to come at a meeting of the European Council on June 28-29.

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