Draghi May Have Italy Risk on His Mind With Fresh Stimulus

(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.

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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