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ECB's Lagarde Says Eurozone Growth Remains Weak; Seeing Signs Of Spillovers

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Eurozone growth remains weak mainly due to the impact of global factors and there are signs of that the slowdown in manufacturing is spreading to other sectors, European Central Bank President Christine Lagarde said in Brussels on Monday.

"As the sector most directly exposed to these global developments, the manufacturing industry has been suffering the most," Lagarde said in the opening statement of her first hearing before the European Parliament's economic affairs committee.

"We are also seeing signs of spillovers to other parts of the economy, with recent survey data pointing to some moderation in the services sector."

The former IMF Managing Director became ECB President on November 1.

Inflation remains subdued and price growth expectations are at or close to historical lows, she said.

The ECB responded to such a weak outlook with the annoucement of a host of stimulus measures in September that included a further reduction to the already-negative deposit rate and the restart of asset purchases.

The bank also introduced a tiering system that will reduce the cost to banks when they deposit money with the ECB as the deposit rate is now negative.

"The Governing Council's decisions in September showed that it was alert to the potential side effects of monetary policy," Lagarde said.

The review of the ECB's monetary policy strategy, which was reviewed last in 2003, will start in the near future, the ECB chief reiterated.

"It is premature to venture here into debates about the precise scope, direction and timeline of our review, as the matter has not yet been discussed thoroughly by the Governing Council," Lagarde said.

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