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ECB's policies inefficient in reviving growth, raise inflation

DAILY SABAH WITH ANADOLU AGENCY
ISTANBUL
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Bank of Japan Governor Haruhiko Kuroda points at a journalist for Q & A during a news conference following a two-day monetary policy meeting at headquarters in Tokyo, Japan. Bank of Japan Governor Haruhiko Kuroda points at a journalist for Q & A during a news conference following a two-day monetary policy meeting at headquarters in Tokyo, Japan.

Bank of Japan Governor Haruhiko Kuroda points at a journalist for Q & A during a news conference following a two-day monetary policy meeting at headquarters in Tokyo, Japan.

The European Central Bank's (ECB) policies including monetary expansion and low interest rates have not yet been able to have the desired effect on weak growth and low inflation in the eurozone.

The eurozone, an "economic and monetary union" including 19 European Union member countries, which choose the euro as a common currency and legal payment instrument, has been in the grip of rock bottom inflation and a low growth rate for a long time.

The ECB, which is in charge of implementing monetary policies in the eurozone, has set a nearly 2 percent inflation target to ensure price stability in the region. The bank had made radical decisions and reduced interest rates in order to invigorate the economy during its September 2014 meeting. In addition to its interest rate move, the ECB also did not hesitate to use some other instruments within the scope of its activities. As a result, it increased a 60 billion euro monthly bond purchase program, which it initiated on March 9, 2015 in accordance with quantitative easing policies, to 80 million euros. However, the bank's radical measures also failed to bring stability to inflation and the eurozone has not yet been able to achieve the desired growth level.

According to the latest data disclosed by the European statistical office (Eurostat), the seasonally adjusted Gross Domestic Product (GDP) in the eurozone increased by 0.3 percent in the second quarter of the year. The fact that the GDP growth was greater at 0.6 percent in the eurozone in the first quarter has led to concerns that the region is going through a period of recession.

The low inflation, which constantly fails to recover, remains a problem in the eurozone. According to the latest data, annual inflation made no progress in August and remained at 0.2 percent, marking no change when compared to July.

The ECB revealed in an August report that the downward risks facing the eurozone's growth outlook continued. Meanwhile, the bank increased the annual GDP rise in the region to 1.7 percent from 1.6 percent for 2016 in September's macroeconomic projections, while reducing it to 1.6 percent from 1.7 percent for 2017 and 2018.

Inflation targets in the eurozone have been downwardly revised, too. The expected inflation for 2016 has been kept at 0.2 percent, while it has been reduced to 1.2 percent from 1.3 percent in 2017. The expected inflation for 2018 has been kept at 1.6 percent.

During a recent press conference in Frankfurt, ECB President Mario Draghi said the monthly asset purchase program of 80 billion euros would continue until March 2017 and might be extended further in case of need.

Draghi reiterated the ECB might use all instruments in its scope of activity, indicating that it might also make amendments to its monetary policies in October.

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