Euro area economy shows resilience after Brexit referendum: ECB chief

The euro area economy showed resilience to global and political uncertainty, notably following the British referendum outcome, European Central Bank (ECB) President Mario Draghi said on Monday.

"The initial impact of the outcome of the UK referendum has been contained and the strong financial market reactions, such as equity price falls, have largely reversed," Draghi told the European Parliament's Economic and Monetary Affairs Committee.

Meanwhile, he warned the effects on the economic outlook "depend on the timing, development, and final outcome of the upcoming negotiations."

Draghi said the recovery in the euro area was expected to continue at a moderate and steady pace, but slower than envisaged in June due to a lower foreign demand outlook.

Real GDP growth is now forecast at 1.7 percent for 2016 and 1.6 percent for 2017 and 2018. Inflation is forecast at 0.2 percent for 2016 and 1.2 percent for 2017, and might rise to 1.6 percent in 2018, according to the ECB chief.

Draghi said the ECB's policy measures were filtering through to the real economy. He pointed to better borrowing conditions for households and firms -- small firms as well as bigger ones -- and stronger credit creation.

Addressing several MEPs' concerns about the low interest rates on savings, Draghi said these "are a symptom of the underlying economic situation."

He said monetary policy could not determine the sustainable levels of real interest rates in the long run, as these in turn depend on long-term growth prospects. "This means that other policy actors need to do their part, pursuing fiscal and structural policies."

He repeated the ECB use all the instruments available in its mandate to secure a return to close to 2.0 percent of inflation over the medium term. Endit