DUBLIN (Reuters) – The euro zone economy will continue expanding but risks ranging from trade tensions to high asset prices are growing, European Central Bank President Mario Draghi told Irish lawmakers on Thursday.
Having exhausted much of its policy firepower through years of support, the ECB has been gradually winding down its stimulus, just as growth is slowing and trade tensions between the world’s biggest powers are undermining confidence.
“While some sector-specific data and selected survey results have been somewhat weaker than expected, the latest incoming information overall suggests that the broad-based expansion in the euro area, and in Ireland, is set to continue,” Draghi told a Parliamentary hearing in Dublin.
Although Draghi reaffirmed the ECB’s plans to wind down its bond purchases, also known as quantitative easing, by the end of the year, he also warned of clouds on the horizon, many of which are beyond the central bank’s policy scope.
“The protectionist trade measures implemented may have had very limited effects thus far, but the escalation of trade tensions is undermining confidence,” Draghi said.
He also singled out Brexit and rising financial stability concerns as areas required monitoring.
“While there is currently no compelling evidence of over-stretched asset valuations at the euro area level, we are seeing some localised risks,” Draghi said. “However, euro area monetary policy is not the appropriate tool with which to address such risks.”
(Reporting by Padraic Halpin, writing by Balazs Koranyi, editing by Francesco Canepa, Larry King)