Euro zone growth gaining momentum but inflation subdued: ECB

FRANKFURT - 21 September 2017: Euro zone economic growth is gaining momentum and the rapid fall in the unemployment rate is encouraging but inflation has yet to show convincing signs of a sustained upward trend, requiring continued stimulus, the European Central Bank said on Thursday.

The firming of the euro also presents a source of risk for inflation because it implies a moderation of price pressures, requiring monitoring, the ECB said in a regular economic bulletin that was largely consistent with its statement after this month’s interest rate decision.

The ECB earlier this month left its ultra-easy monetary policy unchanged but said it would discuss “recalibration” next month, a signal taken by markets as confirmation that the bank would curb its stimulus from next year, given strong growth and a waning threat of deflation.

“The swift decline in euro area unemployment is particularly encouraging against a background of increasing labour supply,” the ECB added. “Nevertheless, broader measures of unemployment suggest that slack is still elevated in many euro area labour markets.”