ECB Cuts Long-Term GDP Growth, Inflation Forecasts

With Draghi having already disappointed markets by failing to deliver a “big bang” announcement, and instead extending the lower for longer period until the first half of 2020 as was already priced in by the market, and unveiling less generous TLTRO III terms that left much to be desired, during today’s press conference Draghi also unveiled the ECB’s latest economic forecasts, which also confirmed that Europe is nowhere near ending its long-running economic malaise.

To wit, while the ECB revised up forecasts for 2019 euro-area growth and inflation by 0.1 percentage points in its new projections, it trimmed its 2020 and 2021 GDP forecasts from the March forecast, by 0.2% and 0.1%, respectively:

GDP growth:

  • Sees 2019 at 1.2% vs 1.1% in March
  • Sees 2020 at 1.4% vs 1.6%
  • Sees 2021 at 1.4% vs 1.5%

A similar adjustment was seen in the inflation forecasts, which while seen increasing by 0.1% in 2019, was trimmed in 2020 from 1.5% to 1.4%, and 2021 was left unchanged:

  • Sees 2019 at 1.3% vs 1.2% in March
  • Sees 2020 at 1.4% vs 1.5%
  • Sees 2021 at 1.6% vs 1.6%

This, combined with the ongoing disappointment from the overall announcement, has pushed the Euro to session highs, hit Bunds and sent European stocks in the red, with the STOXX sliding 0.2% as Draghi continues to speak.


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Author: Tyler Durden