The European Central Bank will keep utilizing all instruments available to oppose the risk of low inflation in the eurozone, Governing Council member Ignazio Visco stated.
For monetary policy, the main challenge remains the persistence of excessively low inflation," Visco, who is also governor of the Bank of Italy, said in his speech delivered on Tuesday at the central bank’s annual meeting. "We will continue if necessary to deploy all the instruments made available to us in our mandate.
Recently, the European Central Bank will announce an updated economic outlook, that could offer further hints regarding the effect of its stimulus program. The central bank’s Vice President Vitor Constancio explained last week that he believes euro zone inflation will be near the European Central Bank’s target of below 2 percent for two years from now, echoing the bizarre policies it sets up and increasing oil prices.
Eurozone consumer prices failed to hike for a fourth consecutive month in May. Prices dropped 0.1 percent from the previous year, according to the European Union’s statistics office in Luxembourg. In Italy, the inflation rate was less 0.3 percent compared to the 0.4 percent recorded last month.
The European Central Bank projected that the inflation rate in the euro zone area would average 0.1 percent in 2016, before advancing to 1.3 percent in 2017 and 1.6 percent in 2018. When asked in an interview whether he believed that consumer prices will climb faster in two years than the current estimate, Constancio said he personally expects so.
Like excessively high inflation, an overly subdued price dynamic is also harmful for economic and financial stability, especially when public and private debt are high and growth is weak," Visco explained in his speech. “Low inflation stems from the fall in oil prices, but it also depends, to a significant extent on internal dynamics," he added, noting that "margins of unused plant capacity and available labor.
At the Vienna meeting on Thursday, the European Central Bank Governing Council is anticipated to keep its policy unchanged again after it extended quantitative easing by a third to 80 billion euros, or approximately $89 billion in March and reduce the deposit rate further below zero.
Confidence in the eurozone increased in May, hitting its highest level in four months, with sentiment among consumers, retails, and construction growing. On the other hand, the one for industry remained untouched and the standard for services dropping.
Visco also noted the signs that the Italian economy is coming back to growth, particularly in domestic demand. He said that the country’s recovery from its longest recession since the World War II is initially focused in the manufacturing segment, later expanded to services and to construction.
ECB Conference Emerged After Brexit
The leaders of the European Central Bank have gathered for a strategy meeting in Portugal. The function will certainly focus on what the central bank can do to reduce the impact of Brexit.
The rattling Brexit vote had shaken financial markets and market players had been looking forward to a response by major central banks.
At its Portugal meeting, which will be concluded on Wednesday, European Central Bank officials have indicated the lender holds ready to support financial stability amid Britains vote to abandon the European Union.
The central bank’s chief, Mario Draghi, expressed his sadness over the result of the referendum and encouraged participants to put the past week’s events aside concentrate on the meeting’s academic themes.
In his speech at the gathering on Tuesday, Draghi called on global central banks to increase cooperation after the Brexit vote with a focus to trimming the effect of Britain’s exit from the European Union.
"We can all profit from a higher level of coordination among central banks," Draghi stated.