FRANKFURT (Reuters) – Euro zone growth remains modest but there are tentative signs of stabilization, even if the coronavirus outbreak in China clouds the horizon, European Central Bank President Christine Lagarde told a parliamentary hearing on Thursday.
The ECB has maintained ultra-easy policies for years to boost growth and Lagarde said this support was still needed to shield the currency bloc from global headwinds.
“While uncertainties surrounding the global economic environment remain elevated, those related to trade tensions between the United States and China are receding,” Lagarde said in comments that largely reflect earlier ECB statements.
“Other risks, however, are still lingering or – such as the uncertainty surrounding the impact of the coronavirus – are a renewed source of concern,” Lagarde told the European Parliament’s committee on economic affairs in Brussels.
The domestic economy remains resilient, she added, with consumption still rising, unemployment at a 12-year low and employment at record highs.
“There are tentative signs of stabilization,” she said. “Forward-looking indicators have come in slightly more optimistic.”
But inflation, the ECB’s primary objective, remains weak and low growth is halting the build-up of inflationary pressures, she said.
Rock-bottom interest rates are also encouraging riskier borrowing and have fueled a property boom in key markets, requiring increased vigilance from the ECB, Lagarde added.
(Reporting by Balazs Koranyi; Editing by Gareth Jones)