Thu, Jun 22, 2017 - Page 11 News List

ECB says Trump risk to economy

Bloomberg

The European Central Bank (ECB) yesterday cited the administration of US President Donald Trump as a key reason the risks to the global economy remain tilted to the downside.

The Frankfurt-based ECB said in an article from its Economic Bulletin that while some concerns over the prospects for world growth have diminished — such as China’s short-term outlook and the resilience of emerging-market economies — others have appeared.

“Since the US [presidential] election [last year], pressures for more inward-looking policies have risen,” the article said.

UNCERTAINTY

“In particular, there is significant policy uncertainty surrounding the intentions of the new US administration regarding fiscal and, especially, trade policies, the latter entailing potentially significant negative effects on the global economy,” it said.

The ECB said an index of geopolitical tensions, which captures incidents of war, political tension and terrorist attacks, was broadly stable between early last year and the start of this year.

BREXIT

It also said that the effect of the UK’s vote to leave the EU has been more benign than initially expected, but medium-term risks remain over the outcome of the Brexit negotiations.

In what might be taken as a nod to its own monetary-policy deliberations, the central bank welcomed the US Federal Reserve’s “careful communication” and “very gradual” path of normalization, saying it has lessened the likelihood of a disorderly tightening of global financial conditions.

The ECB is preparing to discuss how and when to wind down its US$2.3 trillion bond-buying program, which is scheduled to run until the end of this year.

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