Market Overview

Eurozone Has A Long Path Ahead

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There are three important issues that were raised by Draghi at the conference in Frankfurt today.

.                "We may experience a prolonged period of low inflation," Draghi said. The projections for inflation were revised down 0.2 points to 1.1% in 2014, while its first forecast for 2015 predicted consumer prices rising 1.3%. The midpoint for this year was also down 0.1 point to 1.4%

.                Projections though, for GDP growth in 2014 were raised 0.1 point from September's forecast to 1.1%, up from an unchanged expectation of -0.4% this year. GDP growth for 2015 was recovering further to 1.5%.

.                Bank lending in the euro area to companies and households shrank 2.1 percent in October from a year earlier, the 18th consecutive month of declines.

As a result having in mind that cash inflows are not injected in the real economy and the fact that inflation is low indicating that demand for goods in the EZ is deteriorated, isn't it obvious to say that the economy has still a long path ahead?

Also another important argument is that the issue of even lower rates has not closed yet. Mario is constantly mentions that if the CPI continues to decline a new rate would be still on the epicenter.

Considering that the rate cut issues are still on the back of Draghi's head (including also the potential negative deposit rates) and the fact that LTRO money are actually invested in the internal of the economy, the big questions are how viability and growth will be induced in the EZ? And how attractive the EZ for the investors is for the short term? As it is revealed, the fact that the rate of growth and improvement in EZ is very low signifies that investors should concern about the economy more for the long run.

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Eurozone Economics Markets

 

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