ECB sur­vey finds mar­kets ex­pect lower in­fla­tion

Muscat Daily - - BUSINESS -

Frank­furt, Ger­many – Fi­nan­cial ex­perts in the Euro­pean Union have low­ered their in­fla­tion ex­pec­ta­tions for the com­ing years, a Euro­pean Cen­tral Bank sur­vey pub­lished Fri­day showed, re­flect­ing the in­sti­tu­tion's com­pli­cated path to its price sta­bil­ity tar­get.

In its quar­terly sur­vey of pro­fes­sional fore­cast­ers, the ECB found av­er­age price growth pre­dic­tions had been re­vised down 0.1 per­cent­age points for 2017, 2018 and 2019.

Fore­cast­ers now ex­pect in­fla­tion to reach 1.5 per cent this year, fol­lowed by 1.4 per cent next year and 1.6 per cent in 2019.

The lat­est sur­vey re­sults are largely in line with the ECB's own pre­dic­tions, al­though cen­tral bank staff ex­pect in­fla­tion to slow slightly in 2018 to 1.3 per cent.

ECB pol­i­cy­mak­ers use the cen­tral bank's pow­ers to try and hold in­fla­tion at its tar­get of close to, but be­low two per cent -the level be­lieved to be most favourable to growth.

The bank has in­ter­vened mas­sively in the econ­omy in re­cent years to fend off the threat of de­fla­tion, of­fer­ing cheap loans to banks, set­ting in­ter­est rates at his­toric lows and buy­ing tens of bil­lions of eu­ros per month in gov­ern­ment and cor­po­rate bonds.

But while cen­tral bank gov­er­nors be­lieve their pol­icy has boosted eco­nomic growth in the 19-na­tion eu­ro­zone -- reach­ing 0.6 per cent in the first quar­ter of 2017-- there has been lit­tle sign of a cor­re­spond­ing surge in in­fla­tion.

That pat­tern was re­flected in Fri­day's sur­vey, with fore­cast­ers up­ping their growth pre­dic­tions for the com­ing years even as they saw rate of in­fla­tion turn­ing out lower.

The pri­vate-sec­tor ex­perts match the ECB's ex­pec­ta­tions for 1.9 per cent growth this year and 1.8 per cent in 2018, but re­main slightly less con­fi­dent for 2019 with a 1.6 per cent pre­dic­tion -0.1 per­cent­age points lower than the cen­tral bankers.

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