European Central Bank President Mario Draghi said the euro-area economy will slowly recover from its slump next year and inflation will continue to fall.
“Indicators for the fourth quarter signal further weakness although recent survey indicators have stabilized at low levels,” Draghi told lawmakers in Brussels today. The ECB expects “a very gradual recovery in the second half of next year,” even as “the medium-term outlook for economic activity remains challenging,” he said.
The Frankfurt-based ECB cut its economic forecasts earlier this month, predicting the 17-nation region will contract 0.5 percent this year and 0.3 percent in 2013. The Governing Council kept its benchmark interest rate at a record low of 0.75 percent, even though a majority of policy makers were open to easing borrowing costs, according to three officials speaking on condition of anonymity.
“Inflation is expected to decline further,” Draghi said. The inflation rate dropped to 2.2 percent in November from 2.5 percent, reaching the lowest level in almost two years.
Draghi also said the ECB’s involvement in financial supervision “has no bearing whatsoever on our primary objective of price stability” and policy makers “stand ready” to assume their responsibilities “as soon as the legal framework stands ready.”
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