European Central Bank President Mario Draghi said Friday the global recovery is improving, but like an increasing number of financial and business leaders, warned about demographic challenges to growth.
The euro spiked 1 percent to a high of $1.1940, its highest against the U.S. dollar since Jan. 2015 after Draghi’s initial remarks.
“The global recovery is firming up,” Draghi said, according to prepared remarks on the European Central Bank website. He noted that in Europe and Japan, “the consolidation of the recovery is at an earlier stage” versus that of the U.S.
Draghi also said significant monetary accommodation is still needed and that inflation is not yet converging to the central bank’s target, according to a Dow Jones report of a question-and-answer session. The euro edged off session highs to trade near $1.192 following those comments.
Draghi was speaking at the annual central bankers’ meeting at Jackson Hole, Wyoming. His prepared remarks did not comment directly on future ECB monetary policy.
The ECB president also said Friday the central problem of “how to raise potential output growth” faced increasing challenges.
“Without stronger potential growth, the cyclical recovery we are now seeing globally will ultimately converge downwards to those slower growth rates,” Draghi said. “Slower growth will in turn make it harder to work through the debt and demographic challenges facing many advanced economies.”
Ahead of the speech, some speculated Draghi might use Jackson Hole to hint at when the ECB might begin tightening monetary policy by cutting back on its asset purchase program. But in a Wednesday speech in Germany, Draghi did not comment on how the central bank might adjust policy to the improving economy in the euro zone.
On Friday, Germany’s Ifo economic institute said its business climate index edged down to 115.9 from 116.0 in July, versus the consensus Reuters estimate for 115.5.
Earlier, the Fed’s Yellen said the financial system is safer now than it was at the time of the financial crisis about a decade ago and did note regulations may need some adjustments.