President Draghi of the European Central Bank is out signaling some of the expected economic growth and inflation data. What is amazing is that they are not conceding that all of 2012 will be negative despite some lowering of targets. Is it real, or is called ‘living in denial’?
The ECB now sees a 2012 GDP range of -0.5% to +0.3%, versus -0.4% to +1.0% forecast in early December. The ECB also sees 2013 GDP at 0% to +2.2%, down from a December range forecast of +0.3% to +2.3%.
On inflation, the ECB is now signaling levels staying over 2% in CPI expected for 2012. The higher rate is expected to be mostly due to oil prices. Inflation via the CPI is now expected to fall under 2% in 2013 as the risks to mid-term inflation are broadly balanced.
Draghi noted, “The information that has become available since the beginning of February has confirmed our previous assessment of the outlook for economic activity. Available survey indicators confirm signs of a stabilisation in the euro area economy. However, the economic outlook is still subject to downside risks. Owing to rises in energy prices and indirect taxes, inflation rates are now likely to stay above 2% in 2012, with upside risks prevailing. Nevertheless, we expect price developments to remain in line with price stability over the policy-relevant horizon. The underlying pace of monetary expansion remains subdued, consistent with contained inflationary pressures over the medium term.”
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