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ECB Survey of Professional Forecasters Predicts Subdued Inflation in 2014

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ECB Survey of Professional Forecasters Predicts Subdued Inflation in 2014

Eurozone inflation is expected to remain subdued in 2014, a sign the 18-nation currency bloc will struggle to reach the desired inflation target of 2 percent.

Consumer price inflation is expected to reach 1.1 percent in 2014, according to the European Central Bank’s quarterly Survey of Professional Forecasters. Compared with the previous survey, forecasters have lowered their inflation expectations by 0.4 percentage points, the ECB reported today in its Monthly Bulletin. Inflation expectations for 2015 were revised from 1.6 percent to 1.4 percent. Longer-term inflation expectations, meanwhile, remained at 1.9 percent

Weak inflation this year is not expected to harm the Eurozone’s fragile recovery, experts say. Although inflation is expected to remain below the ECB’s 2 percent target for the next three years, gross domestic product should rebound strongly in 2014. Experts forecast the Eurozone economy will expand 1 percent this year and 1.5 percent next year. The Eurozone narrowly escaped recession last year after GDP expanded 0.3 percent and 0.1 percent in the second and third quarters, respectively.

“The average point forecasts for real GDP growth in 2014 and 2015 remain unchanged,” read the Monthly Bulletin. “Expected growth for 2016 is 1.7 [percent], implying an expectation of a continuous but gradual strengthening in economic activity over the years ahead.”

Falling prices and subdued growth are among the biggest concerns for the ECB, which slashed interest rates in November to a historic low of 0.25 percent. With inflation trending at 0.7 percent, market voices are speculating whether policymakers could introduce even more accommodative measures to stimulate the economy. The ECB made no changes to monetary policy at its meeting last week, opting instead to wait for more information. The ECB’s next rate decision will be delivered March 6.

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