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Eurozone inflation too low

November 13, 2014

Professional forecasters surveyed by the European Central Bank have said inflation in the 18-member eurozone will stay lower than previously expected for some years to come. There's also little sign of growth.

Euro banknotes and grocery store products (Photo: Jens Büttner/dpa)
Image: picture-alliance/dpa

The more than 60 economists and academics polled by the ECB cut their outlook for eurozone inflation Thursday, saying they expected prices to rise by only 1 percent next year and 1.4 percent in 2016, down from their earlier forecasts of 1.2 percent and 1.5 percent respectively.

Some investors read the report as a signal that the ECB might now be even more likely to extend its asset purchase program to corporate bonds and possibly even government debt.

ECB President Mario Draghi had said the lender would keep interest rates low and stood ready take additional, unconventional policy actions, if inflation expectations didn't pick up soon.

No quick fix

The ECB's inflation target is below, but close to 2 percent over the medium term, and the bank is scheduled to update its own staff predictions for price stability next month.

Citing falling oil prices and political tensions, the forecasters polled also predicted eurozone growth to slow to 1.2 percent in 2015, down from the 1.5 percent predicted previously.

Deflation - When Everything Gets Cheaper!

"The balance of risks has become more clearly tilted to the downside," the survey said. "Respondents identify geopolitical tensions, mainly in Ukraine and Russia, but also in the Middle East, as by far the main risk."

hg/sgb (Reuters, dpa)