ECB’s Reinesch Sees Signs of Stabilization in Euro-Area Economy

European Central Bank Governing Council member Gaston Reinesch said the euro-area economy should recover later this year, aided by a pickup in global trade and loose monetary policy.

“Available data continue to indicate that economic weakness in the euro area has extended into the beginning of the year, while confirming signs of stabilization in a number of indicators, though weak,” Reinesch said today in the quarterly report of the Luxembourg Central Bank, which he heads. “There should be a gradual recovery of activity later in 2013, supported by a strengthening of global demand and an accommodative stance of monetary policy.”

The ECB has kept its benchmark interest rate at a record low of 0.75 percent since July and revised down its economic outlook on March 7. It now predicts the 17-nation economy will shrink 0.5 percent this year and grow 1 percent in 2014.

“Downside risks remain on these perspectives,” Reinesch said, echoing ECB President Mario Draghi’s March 7 policy statement. “They relate to the possibility of weaker-than-expected domestic demand and exports and to slow or insufficient implementation of structural reforms in the euro area. These factors have the potential to damp the improvement in confidence and thereby delay the recovery.”

Inflationary pressures “should remain contained,” he said in the report. “Inflation expectations for the euro area remain firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2 percent over the medium term.”

The ECB predicts annual consumer-price gains will average 1.6 percent this year and 1.3 percent in 2014.

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