Draghi: ECB aims to keep current level of monetary stimulus

Yannis Stournaras governor of the Bank of Greece

Frankfurt am Main (AFP) - Growth in borrowing by businesses and households in the eurozone picked up only slightly in October, the European Central Bank said Monday, firming up analysts' expectations it will extend monetary easing next week. "We have a moderate recovery - it's been pretty steady despite market turbulence", said Alexander Koch, an economist at Raiffeisen Schweiz in Zurich.

Inflation reflects underlying consumer demand in the economy and while still edging higher this month, 0.6 percent means Europe is still short of a full-fledged recovery.

Though this week's high risk events include another speech by Draghi and then the latest data on inflation for the Eurozone, the main event is Friday's release of U.S. labor data.

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On the broader eurozone level, he referred to obstacles in growth within the common currency area, such as low competitiveness, non-performing loans and limited progress on structural reforms.

The ECB has more work to do to return Eurozone inflation to target on a sustained basis, Jack Allen, a European economist at Capital Economics, said.

"You have headline inflation on the rise nearly exclusively due to energy while core inflation remains very stable", Marco Valli, chief euro-area economist at UniCredit SpA in Milan, said before the publication of the data. According to the data, low energy prices continue to weigh, countering marginally higher food and services prices.

The dramatic increase in benchmark USA 10-year Treasury yields - up 55 basis points in November (the sharpest monthly rise since December 2009) in what has been the most conspicuous manifestation of the so-called "Trumpflation trade" - is putting upward pressure on Europe's bond yields.

Record-low borrowing costs are starting to create unsafe imbalances in the economy, Mario Draghi warned European MPs in Brussels on Tuesday.

European Central Bank head Mario Draghi is indicating that the bank will look for ways to maintain the current level of monetary stimulus at a key December 8 meeting. German 10-year yields, which were in negative territory as recently as early October, now stand at 0.27 per cent.

The ECB chief also warned of prolonged low interest rates which in turn facilitate heavy risks for financial markets.