ECB: Forecasters Cut Inflation Outlook

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The FINANCIAL — Forecasters polled by the European Central Bank cut their inflation outlook for the current year and the next two, a report published by the ECB showed on October 23. The findings are likely to underscore the need for the central bank to pump more money into the economy, according to Nasdaq.

The quarterly Survey of Professional Forecasters now sees inflation in the currency bloc at only 0.1% this year, a cut of 0.1 percentage point versus the previous forecast round in July. For next year, inflation is expected only to be at 1.0% versus 1.3% seen in July. For 2017 inflation is seen at 1.5% versus 1.6% seen previously.

The forecast comes one day after ECB President Mario Draghi strongly hinted that the ECB would intensify its monthly bond purchase program and potentially cut the rate on overnight deposits in a signal that the Frankfurt-based central bank is worried about a lack of inflationary pressure in the currency bloc.

The most recent data put inflation at 0.1% below the level of one year ago, well off of the central bank’s medium-term target of just below 2%.

“The degree of monetary policy accommodation will need to be re-examined at our December policy meeting,” said Mr. Draghi at the ECB’s press conference in Malta, following its policy decision.

The forecast for economic growth was broadly unchanged, with forecasters raising their growth expectations for this year to 1.5% versus 1.4% seen in July. On the flip side, the outlook for the following year was revised slightly down to growth of 1.7% versus 1.8%. The outlook for 2017 was unchanged at growth of 1.8%.

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“The expected upward path for the medium term is largely explained by rising growth in private consumption and investment, as the current low level of energy prices supports disposable income of households and profit margins of companies,” the report said.

 

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