Euro area – ECB stays on course

The European Central Bank (ECB) remains optimistic that the policies it has adopted during the past year will prove sufficient to move inflation back towards the "below but close to 2%" target in 2017. 

At the 3 June post-meeting press conference ECB President Draghi reiterated that the EUR 60bn a month asset-purchase programme is intended to run until September 2016 or until there is a sustained adjustment in the expected inflation path. 

The ECB has not discussed a "QE-exit plan", as this remains a distant prospect, he added. The ECB released updated combined ECB-Eurosystem staff forecasts; the average inflation forecast for 2015 was raised to 0.3% y/y from 0.0%, and is now just above the 0.2% forecast. 

2016 and 2017 inflation forecasts were kept at 1.5% and 1.8%, respectively. Growth projections for 2015 and 2016 were unchanged at 1.5% and 1.9%, respectively, but its 2017 projection was lowered slightly to 2.0% from 2.1%. 

"We expect growth to be higher in 2016, at 2.1%", said Standard Chartered in a report on Thursday.

Notably, the statement no longer mentioned expectations of gradually stronger growth, but only expects growth to broaden. 

Draghi commented that the slightly more downbeat statement mainly reflected external factors that reduced the positive impact from net trade with the rest of the world.Domestic demand remains the key driver of this cyclical recovery.