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Euro Bank warns economy still needs ‘substantial’ support, ahead of ECB October meeting | City & Business | Finance

The central bank currently pumps a massive €60billion into the economy every month, while interest rates remain below zero.

Policymakers took the extreme measures in a desperate effort to raise inflation and kickstart growth in the bloc.

In recent months the economy finally appears to be recovering from the debt crisis that pushed it to the brink in 2012.

Markets have raised expectations that the massive support programme will be hacked back as a result.

But Peter Praet told Belgian newspaper De Tijd that the crutch is still very much needed.

He said: “A substantial stimulus is still necessary.”

And added: “Everyone agrees that we have to make sure that the reduction of the stimulus takes place in an orderly manner, without any excessive shocks.”

It comes as inflation remains below the ECB target of two per cent.

Rising prices are a sign of consumer demand within a economy, low rates and money-printing is supposed to fan the flames.

Mr Praet added: “If inflation becomes too high, we will react just as ruthlessly as we are now in order to get inflation back on track.”

After the ECB’s most recent council meeting, president Mario Draghi warned that the stronger euro is creating concerns for the economy.

The currency has jumped against the US dollar in recent weeks, which could hurt exports from the bloc and take the wind out of the recovery.

A stronger currency also pushes inflation back down.

The next steps for the so-called Quantitative Easing (QE) programme are set to be discussed in October.

Mr Draghi also warned that “A very substantial degree of accommodation still needed for underlying inflation pressures to build up and support headline inflation”.


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