ECB lowers inflation forecasts

The inflation scare in Europe is over.

The ECB lowered its 2024 inflation forecast to 2.3% this year from 2.7% previously. The ECB said that was mainly on lower energy prices.

The 2025 projection was also nudged lower to 2.0% from 2.1% while 2026 was left unchanged at 1.9%.

Those numbers clear the way for the ECB to lower interest rates in a move that could come as soon as April 11 but is more likely at the June 6 meeting.

The projections for inflation excluding energy and food have also been revised down and average 2.6% for 2024, 2.1% for 2025 and 2.0% for 2026.

“Although most measures of underlying inflation have eased further, domestic price pressures remain high, in part owing to strong growth in wages,” the ECB said.

The growth side should give ECB policymakers the nudge they need to offer economic stimulus. Growth this year is now seen at 0.6% from 0.8% in December. The 2025 forecast is unchanged at 1.5%.

Looking further out, the market is now pricing in 97 bps in rate cuts this year compared to 92 bps before the ECB decision.

The euro has fallen to 1.0880 from 1.0895.

This article was written by Adam Button at Source