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ECB Cuts 2018 GDP Forecast, Raises Inflation Outlook

Courtesy of ZeroHedge. View original post here.

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.


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