Ewald Nowotny, Governing Council member of the European Central Bank and governor of Austria's central bank.
European Central Bank Governing Council member Ewald Nowotny suggested the institution may cut its economic forecast when it presents an updated estimate next week.
“It’s no secret that we are seeing somewhat of a downturn in the economy,” Nowotny told reporters in Alpbach, Austria, late yesterday. “Germany is no longer able to be a locomotive for growth.”
Recovery in the 18-nation euro area stalled in the second quarter after its three biggest economies failed to grow, with Germany contracting 0.2 percent. Data due later today will probably show that inflation in the region slowed to 0.3 percent this month, according to the median economist forecast in a Bloomberg News survey.
The ECB, which currently predicts economic growth of 1 percent and inflation of 0.7 percent this year, is scheduled to present new staff estimates on Sept. 4.
ECB President Mario Draghi on Aug. 22 warned that investor bets on euro-area inflation this month “exhibited significant declines at all horizons.” Having previously said that a worsening of the medium-term inflation outlook would provide a reason for broad-based asset purchases, his comments fanned investor speculation the central bank will soon deploy more monetary stimulus to ward off Japanese-style deflation.
Nowotny said yesterday that he shared Draghi’s concerns on the economy.
“I also am worried because what I have described isn’t a big success story,” he said. “We expected an upturn in the euro zone and we do have an upswing -- 2014 is better than 2013, but it is weaker than expected.”
TLTRO Uptake
Nowotny also said that he was counting on high take-up of targeted longer-term refinancing operations, or TLTROs, that the ECB is offering next month.
“Any treasurer who doesn’t make use of this offer is making a big mistake,” he said.
Analysts estimate that banks will borrow 300 billion euros ($395 billion) in the initial TLTRO round, according to the Bloomberg Monthly Survey published on Aug 18.
Nowotny, who heads Austria’s central bank, cut his country’s growth forecast for 2014, saying it was hit by the economic slowdown in the euro area and in particular in Germany. The Austrian central bank now sees GDP increasing by 0.9 percent this year, down from a June forecast of 1.6 percent.
Austria’s economy is much more affected by developments in Germany, the country’s biggest trading partner, than by the conflict between Ukraine and Russia, he said.
To contact the reporters on this story: Boris Groendahl in Alpbach atbgroendahl@bloomberg.net; Alexander Weber in Alpbach at aweber45@bloomberg.net
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