Hurley cites risks to growth

Recent data suggest the euro-area economy is unlikely to strengthen soon and the monetary policy environment is cloudy largely due to volatile oil prices, Central Bank governor John Hurley said yesterday.

In the most explicit statement yet about the depth of ECB concern over the economic outlook, Mr Hurley added that a rise in long-term oil futures 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, he said.

"The strengthening of the exchange rate has acted to slow activity and the potential for further volatility in foreign exchange markets remains an important downside risk to growth," Mr Hurley said in the text of a speech to financial markets association ACI Ireland last night.

Mr Hurley reiterated remarks he made last month in saying that the European Central Bank (ECB) 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.

Following the ECB's decision last week to leave interest rates unchanged at a historic low, ECB president Jean-Claude Trichet gave a guarded reading of the euro zone outlook and cited oil as a risk. But Mr Hurley went further.

A member of the ECB governing council, Mr Hurley 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 have been mixed," he noted. "

While data for January was generally favourable, "data since then has been less supportive". - (Reuters)