ECB Slashes Inflation Forecasts For 2017-2019

Tyler Durden's picture

Yesterday's Bloomberg "trial balloon" that the ECB would cut its inflation forecasts while boosting GDP expectations was confirmed moments ago, when during his prepared remarks Draghi increased the governing council's Eurozone GDP expectations as follows:

  • 2017: from 1.8% to 1.9%
  • 2018: from 1.7% to 1.8%
  • 2019: from 1.6% to 1.7%

However, what the market was focusing on was the ECB's inflation expectations, and it was here that the ECB confirmed that the central bank with the world's biggest balance sheet has once again failed to stimulate inflation, slashing its forecast for 2017-2019 inflation across the board, blaming it on commodity prices. The new forecast is as follows:

  • 2017: from 1.7% to 1.5%
  • 2018: from 1.6% to 1.3%
  • 2019: from 1.7% to 1.6%

And visually:

WIth that cut, the ECB is taking a big gamble because as Bloomberg strategist Tanvir Sidhu writes, while downward revisions to ECB’s 2017 and 2018 forecasts are plausible to roughly around 1.5% given current peak inflation dynamics, "the central bank risks its credibility if cutting longer-term expectations to pre-QE projection levels."

He adds that lower-for-longer and Japanification of the bund curve will continue to play out if the 2019 forecast does come out in line with a report yesterday saying that HICP will be around 1.5%, about projection levels before QE. And while Draghi cut 2018 to only 1.3%, the lowest forecast in the series history, he still expects 2019 inflation to remain just above the 1.6% bogey.

As Bloomberg concludes, cutting the longer-term forecast would make Draghi’s communication more challenging given the ECB’s 33% issue limit means it would have to end QE earlier than inflation dynamics warrant.

As a result, the fate of ECB credibility now remains in the handover of HICP inflation from 1.3% in 2018 to 1.6% in 2019. Any further cuts to the outer years in the coming meets, the ECB will find itself in deep trouble, as it is rapidly running out of German bonds to monetize, and has little other recourse on how to stimulate Eurozone inflation.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
LawsofPhysics's picture


"No Inflation"?!?!?

Yeah, the cost of living just keeps getting cheaper...

"Full Faith and Credit"

Tick tock you criminal motherfuckers!!!!

Haus-Targaryen's picture

If the ECB still exists in 2019 I'll be shocked. 

BaBaBouy's picture

Yaaaay... No Inflations, It's Magic...
They can print more Paper Fiats Keynes Money (Butt Only For the Rich)...

JRobby's picture

"We can not withstand even a modest increase in interest rates. We must continue to grow debt levels at all costs"

"But everything else will increase in price because of massive levels of collusion and antitrust behaviors"

So eat shit.

ejmoosa's picture

If you wanted people to attend your state fair and there was bad weather on the horizon, wouldn't you also get the weatherman to alter his forecast to get people to the fair?  And if the storm hits, well, you did what you had to do, right?



JRobby's picture

When the storm hits, there will be exposure. No matter how prepared you think you are.

When all information is lies, the exposure will be increased by a number of factors.

CRM114's picture

I'd shift the fair to the pre-planned and announced alternate weather day, but then, I'm organised.

MFL5591's picture

The magic and lies never stop with this group of shit!

Iconoclast421's picture

The question is, how much of the market will they NOT own by 2019?

small axe's picture

So, any questions about how the bankers steal your money? Try spending the "no inflation" meme next time you're in the store.

Haus-Targaryen's picture

But don'tcha know, the price of TVs has gotten smaller. 

rmopf2010's picture

Don't forget chinese whatever brand Android phones are at almost the price of one pound of t-bone steaks.

tuttisaluti's picture

yes, Tv's  and i-phones are getting cheaper

A. Boaty's picture

I'll think about that while I eat my screen.

spastic_colon's picture

there you have if anyone should be shocked.....the complete and total failure (to anyone that spends money at least) of the global CB experiment.

Bay of Pigs's picture

The ECB must be using the hedonic adjustment tricks employed here in the USA by the BLS.

Complete horseshit.

DEMIZEN's picture

cut inflation forecast and euro goes south? 

rejected's picture

ECB and credibility in the same sentence! 

Appears today is got out and kiss your central bankers ass day...


0valueleft's picture

The real minutes would reveal a blatant obsession of tactic to suppress gold. True price discovery in gold/silver is the only end to their private feast.

I own a little, not a life changing amount, not talking a book here.  It's just so obvious at this stage in the game, how they claim their policy intends to raise inflation, but every time they get close to their objective, gold starts to shine. Reverse, reverse, reverse!!! They are pointless, a complete clown show. Taxes paying for this ruse is like having to build your own gallows.

I say it long past due we build some gallows. They have zero regard for the production of our plows, so fuck it, lets forge them into swords.

Why do we watch, why do we cry, why do we accept, we are the we, they are not us, they are Goldman Sachs!

Torture then death to Goldman Sachs. Don't you feel the weight of their chains, they are invisible, but we drag them around in servitude, our end is their means. Death to these motherfuckers. Fuck them and their $5000 suits, fuck them and their $500 steaks, fuck them and their private security, fuck them and their $100 snifters of cognac, fuck them and their arrogance. Fuck them and this is how it is, dictating what has value, crushing markets and spirits, telling us what we should like and hate, picking winners and losers.

I'm not free, I'm a fucking joke, a mark, an asshole and a serf....and so are you.

Batman11's picture

The ECB found out how the Euro worked after six years.

What do they know?

Very little.

What is going on at Central Banks?

Alan Greenspan spots “irrational exuberance” in markets in 1996, but does not utter a word as the boom heads into pure mania.

What were the FED thinking when looking at this data?

1929 and 2008 look remarkably similar and to those familiar with the effects of private debt in the economy, the result is inevitable.

Our mainstream economists don’t understand the role of debt in the economy, but even looking at the money supply reveals things are surging out of control.

M3 is going exponential before 2008 and things are totally out of control.

The BoE is manned by experts in today’s economics and so didn’t realise what this data was telling them.

Their economics doesn’t look at private debt in the economy leaving them blind as the problems built up in the same way as they did in the US prior to 1929 and 2008.

The ECB created artificially low interest rates at the periphery of the Euro-zone from the start, encouraging them to go out and spend and inflate housing bubbles in Spain, Ireland, Greece and Holland.

The periphery had traditionally been seen as high risk, with the appropriate high interest rates. The interest rates falls at the periphery were very large, giving a very large impetus to spending, which performed as would be expected.

Years later it became apparent that it was everyman for himself and there would be no debt pooling. Interest rates corrected to the new reality and the Euro-zone crisis began.

The ECB suddenly found out how the Euro worked after six years.

After the Second World War the Japanese economy was in ruins and the banking system full of bad debt. The BoJ bought the bad assets off the banks at full value and returned them to health. The FED did a similar thing with all the toxic waste on the books of US banks after 2008.

The ECB and BoE seem unaware of the Central Banks powers to resolve banking crises.

Until we can get people who know what they are doing running Central Banks they need to be a lot more transparent and so real experts can tell them what is going on and even what their powers are.

Batman11's picture

You silly boys and girls at the ECB.

If you didn’t know how the Euro worked, you should have asked someone.