FRANKFURT, Germany
European Central Bank head Mario Draghi has said the Eurozone economy is recovering and inflation in the 19-country group will stabilize.
Speaking at a conference in Frankfurt on Wednesday, Draghi said, "Eurozone recovery should gradually broaden and, hopefully, strengthen" in the fourth quarter of 2014.
He said: "The slowdown in growth has reversed and developments are pointing in the right direction."
"The stimulus policy will stabilize inflation in line with our objective," he added, referring to the ECB inflation target for 2015 of just below 2 percent.
Draghi said the bank's stimulus program, which consists of a program of buying €60 billion ($63.4 billion) in bond and securities purchases and which started Monday, had already contributed to recovery.
"Euro area real GDP rose by 0.3 percent quarter on quarter in the last quarter of 2014, which is somewhat higher than previously expected," Draghi pointed out.
Economic challenge
The ECB projects growth of 1.5 percent for 2015.
Deflation, or an economic challenge in which a lack of consumer spending slows growth for an extended period, will be prevented, Draghi said, even if the current inflation rate is perilously low.
Draghi said: "The ECB staff projections for inflation this year have been revised downwards to 0.0 percent. This mainly reflects the sharp drop in oil prices at the end of last year.
"But there is good reason to believe that the effect of this shock will not extend beyond 2015, in part because our monetary policy decisions have significantly decreased the risk of second-round effects."
Accordingly, the inflation projection for 2016 has been revised slightly upwards to 1.5 percent and, for 2017, inflation is expected to be 1.8 percent, Draghi forecast.
Low oil prices have been a key factor in Europe's falling into negative inflation rates.
'Fertile ground'
Draghi said stimulus measures were preventing low or negative inflation from becoming part of consumer expectations.
Increasing the money supply leads to a rise in prices, according to economic theory.
The stimulus policy needs, however, "to fall on fertile ground," Draghi warned.
He explained: "Governments can create a more investment-friendly environment by swiftly, credibly and effectively implementing structural reforms.
"The beneficial impact of our asset purchases on financing conditions, rather than reducing the incentives for reforms, will actually increase the benefits of such reforms, as firms will be encouraged to increase investment, bringing forward the economic recovery."
"Effective, price-stability oriented monetary policy and structural reforms work hand in hand," he concluded.
