The Central Bank Governor, John Hurley, has said that recent data suggests the euro area's economy is unlikely to strengthen soon. He told ACI Ireland tonight that the monetary policy environment is cloudy, mainly due to volatile oil prices of late.
He said a rise in long-term oil future prices was a 'new and worrying' feature of oil markets. Other risks to growth included widening global current account imbalances, sharp upward moves in the value of the euro and strong growth in money and credit within the euro zone on the back of low interest rates.
Mr Hurley repeated remarks he made last month in saying that the European Central Bank would have to remove monetary stimulus at some time but that, against the uncertain economic outlook, it was difficult to say when that would be.
'For the moment, however, the view of the ECB Governing Council is that interest rates are at a level which is consistent with the maintenance of price stability. While there are risks to the outlook for both growth and inflation, the central scenario is still for ongoing moderate growth with underlying inflationary pressures remaining contained,' he said.
The European Central Bank decided last week to keep interest rates unchanged at 2%. Mr Hurley is a member of the ECB's Governing Council.
He said the central scenario was for moderate growth in the euro area economy, although the 'pace and timing of any pick-up is subject to much uncertainty'.
'More recently, the signals with regard to the outlook for growth has been mixed. While data for January was generally favourable, data since then has been less supportive,' Mr Hurley said.
He pointed to weaker confidence surveys and activity data against the backdrop of a sharp rise in oil prices. 'This is not encouraging and does not suggest that growth is likely to strengthen in the near term. However, more information from both surveys and hard data is required before firm conclusions can be drawn,' the Central Bank Governor said.
