European Central Bank Warns Of A Patchy Recovery
Posted by ftcom in : Finance , add a commentPARIS — The European Main Bank upgraded its evolution outlook for the euro zone on Thursday, but sought to temper optimism by caution that the nascent economic recovery would be patchy .
In another notation of warning , the central bank manager , Jean-Claude Trichet, also rejected to specify when the bank might begin unwinding the extraordinary steps it took over the last year to support Europe’s banking sector.
“ Nowadays it is not the time to exit , but we are observant , we are permanently looking at the cause ,” Mr. Trichet said at a news conference . “We have no pre-commitment in any respect.”
The bank left its benchmark interest rate at 1 percent, where it has been since May, after a meeting of its governing conference in Frankfurt. Mr. Trichet told a news conference that the final word had been unanimous, that current borrowing prices were “ suitable and that “price developments are expected to remain subdued.”
Over all , analysts made a conclusion that the bank was in no hurry to reverse the measures it had taken — including deep interest rate cuts and efforts to inject more cash into the system — to stimulate the economy.
Still, on the same day that the Organization for Economic Coordination and Development gave a brighter outlook for the world’s major economies, the chief bank lifted its own growth projections as well.
“There are increasing signs of stabilization in economic activity in the euro sphere and elsewhere,” Mr. Trichet said. He cited the inventory period , a pickup in exports and the impact of fiscal and monetary stimulus.
The central bank now expects raise of 0.2 percent in the euro area next year. In June, it valued a decline of 0.3 percent. The new figure is relatively conservative , compared with a market consensus of 0.8 percent.
Mr. Trichet did not exclude the possibility that raise could turn positive before mid-2010. But he was precise to say the recovery would be “very gradual ” and “rather uneven,” because some points supporting growth were momentary and some banks and businesses were still repairing their balance sheets.
“Prudence and warning are of the entity in the present situation,” he said.
Nick Kounis, the chief European economist at Fortis Bank in Amsterdam, said the day the central bank started to grow interest taxes again still appeared “some way off.”
The slow rebound will serve to restrict price increases, Mr. Trichet said.
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