Draghi calls for fiscal stimulus slowing economy

European Central Bank President Mario Draghi called upon euro zone governments to do more to support a faltering economy with fiscal policy Thursday, as he detailed the ECB’s latest raft of monetary measures.

“Governments with fiscal space should act in an effective and timely manner,” Draghi said, only two days after Germany, the euro zone’s largest economy, signaled it’s targeting another balanced federal budget next year.

The euro zone economy is facing an extended slowdown and inflation is likely to stay clearly below the European Central Bank’s medium-term target, Draghi said.

Key points from Draghi’s introductory statement:

 

  • ECB cuts growth forecast to 1.1% in 2019, 1.2% in 2020; keeps forecast of 1.4% in 2021 unchanged
  • ECB cuts inflation forecast for 2019-2021 to 1.2% in 2019, 1.0% in 2020 and 1.5% in 2021.
  • Draghi cites “prolonged presence of uncertainties related to geopolitical factors,” and low inflation expectations.
  • EUR/USD at $1.0941 vs $1.1025 immediately before Draghi’s press conference started.forex.com
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