The ECB reviews its growth forecasts

At the last meeting of the European central bank (ECB), the members of the council increased their growth expectation for the eurozone. The ECB therefore estimates that GDP could increase by 2.2% in 2017 (compared to 1.9% previously). At the same time, the ECB reduced its inflation outlook to 1.2% in 2018 (versus 1.3%) and 1.5 in 2019 (versus 1.6%). This drop in inflation outlook comes essentially from the strengthened euro, which allows to import deflation. The stronger euro remains however a source of worry for the ECB, as European exports will be less competitive in the future.

The ECB left its rates unchanged, but has not communicated about a stop of its bond purchases. The ECB has simply indicated that the current purchases, about 60 billion euro a month, will continue until the end of the year at least. It also reminded the reason for these purchases: the increase in inflation. If that should continue to fall, the ECB would be willing to buy even more bonds. The interest rates are hence not likely to rise.