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ECB's Draghi: Rate cut considered at March meeting

The ECB Governing Council decided to maintain the main interest rates at 0.75% at their March monetary policy meeting. During the subsequent press conference the ECB head Mario Draghi revealed that a reduction was considered by the members.

The president reminded that HICP inflation declined below 2% in February 2013, as expected and that inflationary pressures should remain contained over the policy-relevant horizon, while “the underlying pace of monetary expansion continues to be subdued.” Therefore the ECB will continue with its accommodative monetary policy stance.

Nevertheless, the Eurozone is still experiencing recession at the beginning of 2013 and “necessary balance sheet adjustments in the public and private sectors will continue to weigh on economic activity.” It should start recovering later in the year as a result of the central bank’s accommodative policy and a boost of global demand.

Mario Draghi also presented ECB’s revised growth and inflation forecasts. Eurozone GDP is now expected to drop by between -0.1% and -0.9% in 2013 and remain flat or grow up to 2% in 2014. As far as inflation is concerned, the projections point to an increase of between 1.2% and 2% this year and of between 0.6% to 2.0% the next.

Mario Draghi also stressed that the implementation of structural reforms by EU governments is a crucial element in the combat against the debt crisis and that bringing down youth unemployment should be top priority.

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