ECB Cuts 2018 GDP Forecast, Raises Inflation Outlook

As part of Draghi's prepared remarks, the ECB head released the central bank's quarterly forecasts. Here one surprise was the big drop in 2018 GDP from 2.4% to 2.1%, while 2019 and 2020 were kept unchanged:

  • 2018 cut to 2.1% from 2.4%
  • 2019 unchanged at 1.9%
  • 2020 unchanged at 1.7%

Commenting on the outlook cut, Draghi said that recent economic moderation in euro area reflects pull back from high level. 

More ominously, he also said that the "soft patch may last longer than implied in forecasts." You don't say...

 

Draghi also said that the moderation is partly due to "temporary factors", compounded by uncertainty, and supply constraints (also Easter). Still, he claims that the data remains consistent with solid broad-based growth.

Separately, Draghi said that uncertainty around inflation is receding, and should hover around current level for rest of the year,

But perhaps more surprising is that in the ECB's latest HICP inflation forecast, the central bank now expects inflation to be perfectly unchanged for the next 3 years, from 1.7% in 2018 (up from 1.4% previously), to 1.7% in 2019 to 1.7% in 2020. Of note: the upgrade in near-term inflation is mainly due to oil prices. In other words, after the upcoming OPEC meeting which will send oil prices lower, expect ECB inflation to tumble.

Comments

spastic_colon Thu, 06/14/2018 - 08:58 Permalink

".... the central bank now expects inflation to be perfectly unchanged for the next 3 years,..."

further indicating they have no idea what will happen...............

Let it Go Thu, 06/14/2018 - 09:25 Permalink

The Euro-zone is between a rock and a hard spot!

Unfortunately, much of the problem is rooted in the fact the euro itself was constructed on a weak and flawed foundation. Any currency joining and binding states or countries together must allow for an adjustment to send back funds to its weakest part or eventually it will become unbalanced and fail.

This means that until the EU is prepared to do “whatever is necessary,” to paraphrase ECB chief Mario Draghi, in order to protect retail bank depositors, the EU will remain far from being a united political economy. More on the problems that haunt Europe in the article below.

http://Euro-zone Growth Tepid-Euro Will Suffer.html