(Bloomberg) --
Mario Draghi's promise to add more stimulus unless the euro region's economic outlook improves suggests he's also concerned about a new crisis in countries such as Italy, according to Natixis chief economist Patrick Artus.
“Inflation is not approaching the inflation target, which justifies a more expansionary monetary policy,” says Artus. “But what is the reality? It is perhaps this official message, but it may be also a determination to prevent a new debt crisis, in Italy in particular, and to keep demand strong to push companies to become more efficient.”
A rate cut would be an attempt to bring euro-zone core inflation and expected inflation back toward 2%. Yet loosening policy “may seem surprising” at a time of low unemployment and accelerating labor costs.
The real motive may then be ensuring the euro-region nations' fiscal solvency to prevent a breakup of single currency, he said in a note on Thursday.
| More: ECB's Draghi to Cut as Fragile Truce Fails to Boost Trade: Chart ECB Policy Makers See No Rush for July Interest-Rate Cut (1) Lagarde to Succeed Draghi as ECB Chief as Economy Weakens (3) |
To contact the reporter on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Brian Swint, David Goodman
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