Downside risks have increased in light of Paris attacks - ECB's Praet

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Nov 17, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Mumbai) - Speaking in an interview for the bank's website on Tuesday, the European Central Bank (ECB) Executive Board member Peter Praet noted that the downside risks to the 19-nation bloc’s economy have increased in wake of Friday’s Paris attacks and sounded more upbeat on the economic outlook.

    Key Quotes:

    "Incoming data have been supportive to our base scenario. But we are also very well aware that downside risks are present and even that they may have increased in light of the weekend’s events. On the inflation side, the return to close-to-two-percent is at risk of being pushed backwards again. Hard data have been a little bit less encouraging. We see Q3, which was more or less in line with what we were expecting, but on the low side of estimates."

    "It's not sufficient to say that the base scenario has changed, but the downside risks have increased."

    "Looking at incoming data, I would say that data are more or less in line with our expectations. But this has to be seen in a context where we had repeatedly overestimated future inflation rates. In the last years, we have repeatedly lengthened the horizon over which we would get back close to 2 percent. Mechanically updated projections suggest that the risk is present that we may again have to extend this horizon."

    "Finally they could (effects) also reflect a very pessimistic view on the future, and that's the more secular stagnation scenario where the falls of oil prices would be more the reflection of deep structural problems in the global economy. That's the most pessimistic view, and I don't take that view, I think it's extreme."

    "It is key for a central bank to keep inflation expectations anchored, especially in a period of slack in the economy."
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