ECB Officials’ Inflation Forecasts

March 06, 2014
By Knowledge Leaders Team in Uncategorized

The ECB announced that interest rates would be maintained at current levels earlier today, citing staff macroeconomic projections for the euro area, which foresee annual HICP inflation at 1.0% in 2014, 1.3% in 2015, and 1.5% in 2016.  Though few economists predicted a rate cut, there were rumors that Europe’s central bank might discontinue the sterlization of bond purchases under its Securities Markets Program (SMP)– an action consistent with the adoption of a more accomodative and active policy.  In the end, Draghi defended the ECB’s insistence that the euro zone is not experiencing deflation and that no extraordinary measures are called for at this time.
A current chart of harmonized consumer prices in the euro area, with average and standard deviation trendlines for reference:


The € subsequently rallied, reaching its highest level in two years:


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