Published: Fri, June 09, 2017
Markets | By Terence Owen

Euro area proves stronger as first-quarter growth revised up

Euro area proves stronger as first-quarter growth revised up

It was later found that the euro suffered the move over a leaked inflation report, which was scheduled for publishing, during the interest rate decision of the European Central Bank (ECB).

The debate will take place in Estonia, where the economy grew by 0.8 per cent between the final quarter of previous year and the first three months of 2017. Right now inflation is an annual 1.4 percent.

The ECB is expected to leave policy unchanged later today as inflation remains below its target despite stronger economic growth in the euro zone.

Evidence is piling up that growth in the eurozone has kicked into a higher gear and the region is recovering from the Great Recession and the ensuing crisis over high debt that pushed some eurozone countries, notably Greece, to the brink of bankruptcy. Furthermore, near- to medium-term inflation expectations priced into bond markets put inflation below 1 percent, to say nothing of approaching the ECB's target of just-below 2 percent.

Ending the bond purchases and raising interest rates could have wide-ranging effects, such as a stronger euro and higher interest costs for heavily indebted governments. Headline price growth recovered with oil prices past year but crude's retreat in 2017 has seen CPI turn sharply in recent months.

"Nothing substantial has happened to inflation except the price of oil and the price of food. underlying inflation has remained the same year to year", he noted.

Sources told Reuters last week the European Central Bank will acknowledge the improved economic outlook by removing a reference to "downside risks" in its statement. Thanks to the bond purchases, "five million jobs have been created in the eurozone in the last three and a half years", he said. The first-quarter rate is the highest for two years and backs up a raft of indicators showing that the recovery across the region has picked up momentum.

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The June meeting will coincide with new forecasts for growth and inflation from the eurozone's central banks.

The ECB is coming under increasing pressure from lawmakers to reveal more about their holdings of corporate bonds.

But the bank's announcement Thursday reiterated that its stimulus in the form of monthly bond purchases could be stepped up if the economic outlook worsens.

The bank kept its short-term benchmark rate at a record low of zero.

The ECB kept its rate on bank overnight deposits, which is now its primary interest rate tool, at -0.40 percent.

The ECB is the monetary authority for the countries that use the euro, the shared currency launched by the European Union in 1999.

Pan Pylas reported from London.

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