Eurozone may face recession
Source: Agencies |
October 14, 2011, Friday
|
Print Edition
Print Edition
THE eurozone could fall back into recession and the European Central Bank will discuss cutting interest rates at its policy meeting next month, ECB policy makers said yesterday.
ECB Governing Council member Erkki Liikanen stressed, however, that the eurozone's central bank was in no way pre-committed to cutting rates when it meets in November.
Last week, the ECB opted to keep rates on hold at 1.5 percent despite some of the bank's policy makers calling for a cut amid signs the euro area economy is deteriorating further and as Greek default fears weigh on the markets.
Eurozone inflation jumped to 3 percent last month. Several ECB policy makers have said they expect it to ease below the bank's target level of just under 2 percent next year - a view echoed by Jozef Makuch, Slovakia's central bank chief.
"I expect inflation to drop below 2 percent next year," Makuch said. "Negative gross domestic product can't be ruled out if downside risks materialize."
The ECB said in its October monthly bulletin, released yesterday, that downside risks relate especially to financial market turmoil. It also saw energy prices, protectionism and global imbalances as downside threats to growth.
Makuch's views on the economic outlook echoed comments from Austrian central bank chief Ewald Nowotny, who said earlier this week the eurozone economy risks a protracted period of weakness while inflation is not a worry.
But Liikanen said risks to stable prices are still balanced.
"Risks for inflation .... are on balance," Liikanen, who is also governor of Finland's central bank, said in Helsinki. Asked about a possible ECB rate cut, he added: "We have no pre-commitment, we'll discuss that in November, next time."
Jose Manuel Gonzalez-Paramo, another ECB policy maker, said central banks must be unwavering in their determination to keep inflation at bay.
He said in the ECB case it is price stability, and the central bank has to perform its role as a key anchor of stability.
ECB Governing Council member Erkki Liikanen stressed, however, that the eurozone's central bank was in no way pre-committed to cutting rates when it meets in November.
Last week, the ECB opted to keep rates on hold at 1.5 percent despite some of the bank's policy makers calling for a cut amid signs the euro area economy is deteriorating further and as Greek default fears weigh on the markets.
Eurozone inflation jumped to 3 percent last month. Several ECB policy makers have said they expect it to ease below the bank's target level of just under 2 percent next year - a view echoed by Jozef Makuch, Slovakia's central bank chief.
"I expect inflation to drop below 2 percent next year," Makuch said. "Negative gross domestic product can't be ruled out if downside risks materialize."
The ECB said in its October monthly bulletin, released yesterday, that downside risks relate especially to financial market turmoil. It also saw energy prices, protectionism and global imbalances as downside threats to growth.
Makuch's views on the economic outlook echoed comments from Austrian central bank chief Ewald Nowotny, who said earlier this week the eurozone economy risks a protracted period of weakness while inflation is not a worry.
But Liikanen said risks to stable prices are still balanced.
"Risks for inflation .... are on balance," Liikanen, who is also governor of Finland's central bank, said in Helsinki. Asked about a possible ECB rate cut, he added: "We have no pre-commitment, we'll discuss that in November, next time."
Jose Manuel Gonzalez-Paramo, another ECB policy maker, said central banks must be unwavering in their determination to keep inflation at bay.
He said in the ECB case it is price stability, and the central bank has to perform its role as a key anchor of stability.
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