REPORT
By Abdulselam Durdak
Frankfurt briefing, April 24

-Markets to focus on Draghi’s statements

The European Central Bank (ECB) will hold a meeting in Frankfurt on Thursday in which interest rate decisions and measures taken by the bank will be shared. This week markets will focus on ECB President Mario Draghi.

The Eurozone, which includes 19 EU members that adopted the euro as their common currency, struggled with very slow inflation and low growth rates in the past.

The ECB, the body responsible for managing monetary policy in the euro area, is targeting inflation in the region of just below but close to 2 percent to maintain price stability in the region. The ECB is also implementing some measures, including an asset purchase program and a low-interest policy for these reasons.

 

According to the statistical office of the European Union, Eurostat, Euro area annual inflation was 1.5 percent in March 2017, down from 2 percent in February.

Headline inflation, in particular, which is close to 2 percent, triggered the view that the ECB would gradually end measures to curb inflation.

However, ECB officials say that the core inflation rate is still low and that it is too early to declare a "victory" in inflation. In addition, the bank wants the underlying dynamics of inflation to become more stable.

Overall, both the dynamics of the headline inflation and the low rate of core inflation indicate that the bank has not yet achieved its inflationary aim. Therefore, it is expected that the bank will continue its measures at least until the end of the year and closely monitor developments.

Draghi is likely to draw attention to inflationary fluctuations and not make any changes to the bank's policies. In addition, Draghi will recall that asset purchases will continue at the level of €60 billion per month from the beginning of April.

24 Apr,2017

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