ECB Still Far Off Meeting Inflation Target

The eurozone's economic prospects over the coming six months improved considerably in May 2017. However, an end to the European Central Bank's (ECB) expansive monetary policy is still not in sight. In the view of the majority of the 350 financial market experts surveyed regularly by the Mannheim-based Centre for European Economic Research (ZEW) on this issue, the ECB will not reach its inflation target of two per cent for at least the next two years. Only a small fraction of those surveyed thought the ECB was likely to succeed in meeting its target.

The projected average values for the main refinancing operations rate in both the short and long term are not much higher than zero per cent. The interest range for the coming six months amounts to {0,01%; 0,08%} and for the next 24 months {0,11%; 0,66%}. Nevertheless, 13 per cent of the surveyed experts predicted a considerably higher interest range for the next two years. They anticipated a main refinancing operations rate of between 0.5 per cent and far above one per cent.

The experts raised their predictions regarding inflation for the current year on average to 1.6 per cent. Meanwhile, they anticipate a similar level of inflation in 2018 and an increase to 1.8 per cent in 2019. According to the majority of experts, the most significant reason for the slight upwards correction in their predictions for 2017 was the improved economic data. The price of raw materials and imports, wage development and monetary policy, meanwhile, played only a minor role.

For further information please contact

Dr. Michael Schröder, E-mail schroeder@zew.de