In World Economy News 21/01/2017
Underlying inflation in the euro zone will remain weak for years to come, a survey showed on Friday, suggesting that the European Central Bank is still far from scaling back its unprecedented stimulus measures.
Underlying inflation, a key measure watched by the ECB, is seen rising to just 1.1 percent this year, barely half of the bank’s inflation objective, then inching up to 1.3 percent in 2018 and 1.5 percent in 2019, the ECB said in its quarterly Survey of Professional Forecasters.
The ECB kept its unprecedented stimulus measures in place on Thursday, arguing that the recent price surge is only temporary and due almost entirely to oil price rises. Underlying inflation, or prices excluding food and energy, lacked a convincing upward trend, the ECB said.
Headline inflation, now running at 1.1 percent, its highest level in over three years, is expected average 1.4 percent this year, 1.5 percent in 2018, then rise to 1.8 percent by 2021, still shy of the ECB’s target. The central bank aims for inflation of below, but close to, 2 percent.
“There are no signs yet of a convincing upward trend in underlying inflation,” Draghi told at a press conference on Thursday after reviewing the survey’s results. “Measures of underlying inflation are expected to rise more gradually over the medium term.”
Inflation has been far below the ECB’s target for years with at least Ireland still in deflation, and Cyprus, Greece and Italy recording close to zero price growth, illustrating that the bloc is far away from fully recovering from one of the worst financial crises for decades.
Source: Reuters (Reporting by Andreas Framke; Editing by Balazs Koranyi and Toby Chopra)
