The European Central Bank said the euro-area economy should start to gradually recover from recession later this year as the effects of low interest rates and calmer financial markets take hold.
“Our accommodative monetary policy stance, together with significantly improved financial-market confidence and reduced fragmentation, should work its way through to the economy, and global demand should strengthen,” the Frankfurt-based ECB said in its monthly bulletin published today, echoing President Mario Draghi’s Jan. 10 policy statement. “Inflationary pressures should remain contained.”
The 17-nation currency area is stuck in recession as a debt crisis that’s raged since 2010 weighs on demand and investment. The ECB, which left its benchmark rate at a record low of 0.75 percent last week, said its bond-buying plan and long-term lending operations have helped to restore relative calm to financial markets, and it’s now up to governments to press ahead with economic reforms.
“Further structural reforms should be rapidly implemented to make the euro area a more flexible, dynamic and competitive economy,” the ECB said.
Risks to the economic outlook remain on the downside, it said. “However, more recently several conjunctural indicators have broadly stabilised, albeit at low levels, and financial market confidence has improved significantly,” the ECB said. “Later in 2013 a gradual recovery should start.”