Draghi warns of inflation risk from Syria chaos

Tim Wallace
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INSTABILITY in the Middle East could cause volatility in markets and push up prices in Europe, European Central Bank (ECB) boss Mario Draghi warned yesterday.

He increased his growth forecast, estimating the euro economies will shrink 0.4 per cent this year, a smaller fall than the 0.6 per cent previously predicted. And in 2014 he expects one per cent growth, up from 0.9 per cent previously.

But those hopes could be knocked by any rise in instability from Syria and the Middle East.

“The risks surrounding the economic outlook for the Eurozone continue to be on the downside,” Draghi said. “Risks include higher commodity prices in the context of renewed geopolitical tensions, weaker than expected global demand and slow or insufficient implementation of structural reforms in Eurozone countries.”

It came as the ECB discussed cutting interest rates again, despite encouraging signs the currency area is starting to grow once more

But despite Draghi’s dovish stance market interest rates rose.

Ten year German bund yields edged up 0.1 percentage points to 2.04 percent, while French 10-year bonds increased the same amount to 2.63 percent.