ECB in­fla­tion sur­vey backs case for step­ping up stim­u­lus again

The Pak Banker - - COMPANIES/BOSS -

The Euro­pean Cen­tral Bank pub­lished up­dated eco­nomic pro­jec­tions by ex­ter­nal an­a­lysts that back the case for more stim­u­lus. Pro­fes­sional fore­cast­ers cut their in­fla­tion out­look for this year and next, ac­cord­ing to the ECB's quar­terly sur­vey pub­lished on Fri­day. An­a­lysts see in­fla­tion av­er­ag­ing 1.6 per­cent in 2018, a level that the Frank­furt-based cen­tral bank less than two months ago pro­jected would be reached by 2017.

The ECB is strug­gling to lift in­fla­tion from close to zero to­ward its goal of just un­der 2 per­cent, de­spite an un­prece­dented quan­ti­ta­tive-eas­ing plan and record-low in­ter­est rates. On Thurs­day, Pres­i­dent Mario Draghi held out the prospect of more stim­u­lus as early as March as cool­ing Chi­nese growth sends global mar­kets tum­bling and ex­ac­er­bates an oil crash that is damp­ing con­sumer prices.

"We've plenty of in­stru­ments," the ECB pres­i­dent said on Fri­day at the World Eco­nomic Fo­rum in Davos, Switzer­land. "We have the de­ter­mi­na­tion, and the will­ing­ness and the ca­pac­ity of the Gov­ern­ing Coun­cil to act and de­ploy th­ese in­stru­ments."

The ECB says fore­cast­ers see in­fla­tion av­er­ag­ing 0.7 per­cent in 2016 and 1.4 per­cent in 2017, down from 1 per­cent and 1.5 per­cent, re­spec­tively. They cut their long-term out­look to 1.8 per­cent from 1.9 per­cent.

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