European Stocks Climb as E.C.B. Pledges to Keep Monetary Policy Loose ; Bank's President Cites a 'Fragile' Economy with Recovery in Its Infancy

By Jolly, David | International Herald Tribune, September 17, 2013 | Go to article overview

European Stocks Climb as E.C.B. Pledges to Keep Monetary Policy Loose ; Bank's President Cites a 'Fragile' Economy with Recovery in Its Infancy


Jolly, David, International Herald Tribune


With the euro zone having posted just one quarter of weak growth after six consecutive quarterly declines, the recovery "is only in its infancy," Mario Draghi, the bank's president, said.

European stocks rose on Monday, with Germany's Dax index reaching an all-time high, after the European Central Bank chief pledged to keep euro zone monetary policy loose just days before a meeting at which the Federal Reserve may announce a scaling back of its monetary stimulus.

With the euro zone having posted just one quarter of weak growth after six consecutive quarterly declines, the recovery "is only in its infancy," Mario Draghi, the bank's president, told business leaders at a conference in Berlin.

"The economy remains fragile," Mr. Draghi said. Considering the high unemployment and subdued inflation in the 17-nation currency bloc, he added, the E.C.B. expects its key interest rates "to remain at present or lower levels for an extended period of time." The E.C.B. has kept its benchmark rate target at 0.5 percent since May.

The Federal Reserve's policy board begins a two-day meeting Tuesday, at which the Fed may announce a schedule for reducing its monthly asset purchases by the end of the year.

Many investors have been unnerved by the prospect of a "tapering" of the Fed's monetary stimulus, which is known as quantitative easing, with many emerging market currencies and bonds suffering as money floods back to the developed world in anticipation of rising interest rates.

Christian Schulz, an economist in London with Berenberg Bank, said Mr. Draghi had clearly timed his message to the Fed meeting "to remind people that we are just at the very beginning of recovery and they're not going to raise interest rates soon."

Stocks were also lifted by news Sunday from Washington that President Obama's preferred candidate to replace Ben S. Bernanke as Fed chief, Lawrence H. Summers, had withdrawn his candidacy in the face of opposition from key senators. …

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