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Mario Draghi: "Stronger recovery is unlikely in the coming months"

FXStreet (London) - In his opening keynote speech at the Frankfurt European Banking Congress, European Central Bank president Mario Draghi emphasised the risk that a too prolonged period of low inflation becomes embedded in inflation expectations, and that the firm anchoring of inflation expectations is critical under any circumstances.

- “Two and a half years ago, the euro area faced a very bleak situation. We had a fragmented financial system, a banking sector that would not lend and an economy in recession. European economies were on diverging but generally downward paths.”

- “Since then governments and the ECB have taken several steps to address fragmentation, and the financial situation in the euro area has improved dramatically. Spreads on government bonds have fallen on average by 3 percentage points. Interest rates on corporate and bank bonds have also converged substantially. “

- “Nevertheless, these positive developments in the financial sphere have not transferred fully into the economic sphere.”

- “Indeed, the latest flash euro area Purchasing Managers Index released yesterday suggests a stronger recovery is unlikely in the coming months, with new orders falling for the first time since July 2013.”

- “In this context, the inflation situation in the euro area has also become increasingly challenging. Headline inflation has fallen significantly over the last year. Last November, it still stood at 0.9 percent. This was low, but it was generally expected

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