ECB to Lower 2019 Inflation Forecast as Bond-Buying Ends

(Bloomberg) -- The European Central Bank is set to lower its inflation forecast for 2019 when it publishes an updated outlook on Thursday, according to people familiar with the matter.

Staff projections foresee consumer-price growth slightly weaker than the 1.7 percent previously expected for next year, and the outlook for economic growth has also been revised down, the people said. They asked not to be named as the forecasts aren’t final until they’re unveiled by President Mario Draghi. An ECB spokesman declined to comment.

ECB to Lower 2019 Inflation Forecast as Bond-Buying Ends

The euro fell as much as 0.1 percent on the news before recovering. It was trading at $1.1382 at 11:12 a.m. in Frankfurt.

Downgrading the inflation outlook now, even mildly, complicates the ECB’s plan to end its asset-purchase program. Policy makers are widely expected to confirm that the four-year-old stimulus measure will be capped at 2.6 trillion euros ($3 trillion) at the end of this month, despite a fragile economic outlook amid a range of euro-zone and global risks.

Inflation is seen picking up gradually in 2020 and 2021, one of the people said. The ECB’s goal is to keep inflation just under 2 percent without extraordinary monetary stimulus.

Bloomberg Economics predicts that the ECB will lower its inflation and growth forecasts, saying that will help the Governing Council stick to its assessment that risks to growth are balanced.

What Our Economists Say ...
“At this stage it’s better to present forecasts free of wishful thinking than to alter the balance of risks -- that could send a signal to financial markets that stimulus withdrawal will be delayed and we don’t think the ECB’s ready to send that message yet.”

-- Jamie Murray, David Powell and Maeva Cousin, Bloomberg Economics. See the EURO-AREA PREVIEW

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