Frankfurt: Eurozone inflation will be weaker than previously expected this year and next, an updated survey for the European Central Bank indicated on Thursday, darkening the Eurozone’s economic outlook.
The quarterly Survey of Professional Forecasters (SPF) also suggested that this year’s Eurozone growth would be weaker than previously expected, adding to the bloc’s woes after the German economy shrank in the second quarter and France stagnated.
The survey raises fresh questions about the ECB’s threshold for embarking on a policy of quantitative easing (QE) — essentially, printing money to buy assets.
A Reuters poll of economists conducted on August 7-12 pointed to a one-in-three chance of the ECB embarking on such an asset purchase programme in 2015.
Last week, ECB President Mario Draghi told his monthly news conference that the bank’s policymaking Governing Council was “unanimous in its commitment” to use measures including QE if its medium-term outlook for inflation were to change.
Draghi also cited “heightened geopolitical risks” related to the impact on the Eurozone economy from the Ukraine crisis.
Deutsche Bank has cut its 2015 inflation forecast for the 18-member single currency zone to 1.1 per cent from 1.2 per cent on the expectation of western European food manufacturers offloading excess output in the euro area as a result of a Russian ban on importing their produce.
However, some European officials expect that any impact from the Russia sanctions might show up in a more muted rebound, rather than a fall, in already weak food prices.
The ECB’s third-quarter SPF showed a drop in the inflation forecast for this year to 0.7 per cent from 0.9 per cent previously, and a cut in the 2015 projection to 1.2 per cent from 1.3 per cent.
