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ECB forecasts higher growth but keeps rates on hold

ECB president Mario Draghi also hinted that there was no need to cut rates further.

He told a press conference: “We are now confident that inflation will converge with our objectives.”

ECB2The ECB now expects growth across the eurozone to be 1.9% in 2017 compared with its March forecast of 1.8%.

It also increased its growth projection for 2018 to 1.8% from 1.7%, and for 2019 to 1.7% from 1.6%.

Earlier on Thursday, the Eurostat statistics agency had said the eurozone economy had grown at its fastest rate in a year during the January-to-March quarter.

At that rate, the 19 countries that use the euro would see growth at 2.3% this year, nearly double the rate of the US, which is on course to grow 1.2%.

Recovery

Mr Draghi said the recovery was due to a pick-up in investment and corporate profitability, gains in employment and the global recovery supporting trade and euro area exports.

However, he added that growth prospects were being dampened by “a sluggish pace of implementation of structural reforms”.

He said that the ECB would continue its stimulus programme buying bonds, adding that the “ECB will be in the market for a long time”.

The bond buying programme is expected to top 2 trillion euros by the year end, and its current interest rates mean that banks have to pay a deposit rate of 0.4% to park their funds with the ECB.

Aberdeen Asset Management Senior Investment Manager Patrick O’Donnell said:”The ECB is essentially in a holding pattern, waiting for more positive inflation data to come in.

“There’s no appetite to risk choking off the growth that the economy has been seeing of late. Doing nothing is probably the right decision at the moment.”

Source: bbc

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