Expect US And EU Monetary Policies To Diverge
The monetary policies of the United States (Fed) and the European Union (EU) may remain fundamentally different for the foreseeable future, head of the European Central Bank (ECB) said.
This difference could be explained by the contrast between the recovery in the United States and a still fragile return to growth in the European bloc, ECB Governor Mario Draghi said here on the sidelines of the World Bank and International Monetary Fund (IMF) Annual Meetings in Lima.
Acknowledging that the EU faces “significant” Southside risks, the ECB governor said late Friday that “our monetary policies do present paths that are very different. I would say fundamentally diverging paths for the future”.
He added that these downside risks were characterized by a slowdown in developing economies, appreciation of the euro and the fall in commodity prices, particularly oil.
“Developments surrounding slower growth in emerging-market economies are posing renewed risks to the Euro-area outlook,” Draghi explained.
Furthermore, he warned that should these risks persist, the eurozone might have to resort to adjustments in its quantitative easing policy to see it through.
The EU will consider any instruments available to it, particularly adjusting the size and duration of the asset-purchase program,he said.
He also called for the Eurozone area to embark on a reform monetary package to improve its ability to resist and adapt to global economic shocks.
Stay tuned…
HeffX-LTN
Paul Ebeling
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