ECB puts oil hit to potential GDP at less than 1% over four years – Reuters

The European Central Bank (ECB) said in a statement on Monday, a sustained rise in oil prices will reduce the eurozone's potential output by less than 1% over four years, Reuters reports.

The reduction in the bloc’s output will account for a small hit that could be further reduced by the green transition, the ECB said.

Key takeaways

“Using its own forecasting model, the ECB found that an increase of 1% in oil prices would reduce the euro area's growth potential by around -0.02% in the medium term.”

“Assuming a 40% rise in oil prices in the next four years compared to 2017-20, the ECB concluded that potential output in the euro area would be cut by just 0.8% over that period.”

"In particular, for transportation and household energy consumption, viable green alternatives exist that are far less dependent on oil.”

Market reaction

EUR/USD was last seen trading up 0.40% at 1.0258, unperturbed by the above report.