Mario Draghi, chief of the European Central Bank (ECB), said today that the economic recovery in the Eurozone is likely to be dampened – partly because of the UK's Brexit vote.
Euro area GDP was up by 0.3 per cent quarter-on-quarter in the second quarter and incoming data points to ongoing growth in the third quarter, Draghi said. "Looking ahead we continue to expect the economic recovery to proceed at a steady rate," he added.
"Favourable financing conditions and improvements in the demand outlook and in corporate profitability continue to promote a recovery in investment," he said.
"Sustained employment gains, which are also benefiting from past structural reforms, and still relatively low oil prices provide additional support for households’ real disposable income and thus for private consumption."
However, Draghi said that recovery in the euro area would be hampered by subdued foreign demand, which is being driven in part by uncertainty arising from the outcome of the UK's EU referendum.
"The risks to the euro area growth outlook remain tilted to the downside and relate mainly to the external environment," he said.
In spite of this, the ECB raised its forecast for growth in 2016 from 1.6 per cent to 1.7 per cent, but trimmed forecasts for 2017 and 2018 from 1.7 per cent to 1.6 per cent.
Draghi was speaking at a press conference after the ECB left rates unchanged once again at today's meeting of the general council.
He reiterated that the bank will leave its quantitative easing (QE) programme running until March 2017 – or until it sees a "sustained adjustment in the path of inflation consistent with its inflation aim" – but said the governing council had not discussed whether to extend QE. He also said the council had not discussed helicopter money.
When asked about potential negative effects of the bank's monetary policy, Draghi said "the transmission of our monetary policy has never been better". He added that there were no real signs that people have been hoarding cash because of negative interest rates.