ECB Upgrades 2014 Growth Forecast

The European Central Bank (ECB) upped its growth forecast for 2014 on Thursday, sending the euro higher, but downgraded its outlook for inflation.

Speaking at his monthly press conference, ECB President Mario Draghi predicted the euro zone economy would grow by 1.2 percent this year. This was better than the 1.1 percent growth forecast issued by the central bank at the end of last year.
“The ongoing recovery is expected to proceed, albeit it at a slow pace,” Draghi told journalists in Frankfurt, Germany. He reiterated that risks to the euro area remained “to the downside.”

Growth in 2015 and 2016 is seen at 1.5 percent and 1.8 percent respectively.

Draghi downgraded the ECB’s inflation outlook for 2014 to 1.0 percent, from the 1.1 percent forecast at the end of last year — well below the central bank’s targeted level of “close to” 2 percent.

He reiterated that the euro zone was facing a “prolonged period of low inflation”, but declined comparisons with Japan, which suffered deflation during the 1990s.

“We believe the situation is different,” Draghi told reporters, saying that the ECB differed from the Bank of Japan in that it had taken “early decisive action” to tackle economic stagnation.

He added that consumer demand in the euro zone was boosted by low energy prices, and that bank and company balance sheets were better in the area than they were in Japan during its “lost decade”.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza