ECB survey sees lower inflation, higher GDP growth

[FRANKFURT] Euro zone inflation may slow more than earlier expected in the coming years but economic growth and the drop in unemployment could exceed past projections, the European Central Bank's Survey of Professional Forecasters showed on Friday.

The ECB, which uses the survey in policy decisions, kept its ultra easy policy unchanged on Thursday, calling for patience and persistence in getting inflation back up to its target.

The survey, based on responses from 56 forecasters, sees inflation at 1.5 per cent this year, 1.4 per cent in 2018 and 1.6 per cent in 2019, all 0.1 percentage point below previous projections made three months ago. The longer-term expectation for five years out was unchanged at 1.8 percent.

"To two decimal places, however, these revisions were actually much smaller across rounding thresholds," the ECB said about the revisions.

It added that the balance of risk to longer-term inflation expectations remained to the downside.

The ECB targets inflation at just below two per cent and its staff projections indicate it will continue to miss this target at least through 2019.

Expectations for core inflation were revised up to 1.1 per cent for this year from one per cent but were left unchanged further out with forecasters predicting 1.3 per cent next year, 1.5 per cent in 2019 and 1.7 per cent over the longer term.

"Respondents who revised up their 2017 expectations tended to cite the improved growth outlook," the ECB added.

REUTERS