Fundamental Comment

ECB raises growth forecasts, yet inflation to miss target until 2020

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European Central bank President Mario Draghi started his conference by confirming the central bank will hold interest rates at the current levels for an extended period of time.  

Draghi stressed the euro area still needs favorable financing conditions despite ht recent improvement in euro area economic growth.

Inflation will converge with the ECB’s target of close to 2 percent with time even as inflationary pressures have not yet shown a significant upturn.

The ECB lifted its growth projections to 2.4% this year from 2.2 percent predicted in September, and 2.3% in 2018 (prev 1.8%), 1.9% in 2019 (prev 1.7%) and 1.7% in 2020.

The ECB also raised its inflation forecasts for 2018 to 1.4 percent from 1.2 percent, then it will rise to 1.5% and 1.7% in 2019 and 2020 respectively. This means the rate would remain below the bank’s target until at least 2020, which means the accommodative stance would still be required.

Finally, Draghi ended his statement by urging eurozone governments to “substantially” step up their structural reforms.

As of 13:49 GMT, the euro traded slightly higher against the greenback at 1.1835, after reaching a high of 1.1862.

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