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Financial News: ECB's Coeure Says Risks To Growth Outlook Neutral

ECB's Coeure Says Risks To Growth Outlook Neutral

03/31/2017 - 08:32:00 (RTTNews)

(RTTNews) - Latest economic data shifted the risks to growth in the euro area to neutral territory and the central bank's forward guidance remains valid as core inflation is subdued, European Central Bank Executive Board member Benoit Coeure said Friday.

"The latest incoming data have shifted the balance of risks for growth towards neutral territory in my view," Coeure said at an event in Brussels.

"But at the same time, measures of underlying inflation in the euro area remain subdued and our projected path of inflation still remains highly conditional on our policy stance."

Official data released on Friday showed that Eurozone inflation dropped more-than-expected to 1.5 percent in March from 2 percent in February.

Core inflation that excludes energy, food, alcohol and tobacco slowed to 0.7 percent from 0.9 percent.

The ECB aims to keep inflation 'below, but close to 2 percent'.

"This clearly suggests that current expectations on the intended horizon of our purchases, as encapsulated in our Introductory Statement, and on the sequencing of policy instruments, remain valid today," Coeure said.

The rate-setter also stressed that the ECB has maintained both "easing biases" - the one on asset purchases and the one on key interest rates, meaning that rates could go lower.

Regarding the communication of a change in policy expectations, Coeure said, "Should we conclude that an adjustment is needed, we should not hesitate to adapt our communication."

If the ECB decides to change its policy expectations based on the improvement in the economic situation, it does not mean that the bank would not lower interest rates or increase the pace of purchases in any state of the world, Coeure said.

"It just means that - given the current outlook - it seems increasingly less likely that we will have to do so," he added.

The policymaker also noted that any change in policy expectations would not have any automatic implications for policy tools.

"Ultimately, also the choice of sequencing of policy instruments will be the outcome of our regular assessment of the medium-term price stability outlook, reflecting the state-dependent nature of our expectations of the horizon over which our policy instruments are likely to be maintained," Coeure said.

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