E EU Economic Forecasts: Inflation To Stay Low, GDP Subdued

The EU released the growth forecasts for the Eurozone today and the picture wasn’t rosy. The slowdown from China and faltering growth in the emerging markets, among other factors are likely to contribute to a further slump in the region. According to the growth forecasts released today, the 28-country EU growth is expected to stay at 1.90%, unchanged from 2015 while 2017 is expected to see economic growth expanding at a pace of 2.0%, a modest revision from 2.10% previously.

Releasing the economic forecasts, the EU commission noted that “the recovery was slow, in comparison to both historical as well as other advanced economies.” On inflation, the EU commission expects Eurozone inflation to average just around 0.50% in 2016, a sharply downward revised estimates from 1.0% previous forecasts while in 2017, inflation is expected to rise to 1.50% but still below the ECB’s 2.0% targeted mandate. On EU unemployment, the commission was more optimistic noting that the unemployment rate could fall to 9.0%, down from 10.5% at the most recent release and an upward revision from previously estimated 9.50%.

In regards to Germany, the EU’s economic powerhouse, the commission trimmed the forecasts for both 2016 and 2017. It expected German GDP to expand at a pace of 1.80% into 2017, down from a modest previous forecast of 1.90%.

ECB to decide in March

The EURUSD is currently up 0.66% for the day, breaking above the 1.11 barrier. The single currency gained 1.70% already yesterday on a weaker US Dollar while currently up 3.22% at 1.118 since February.

The ECB, at its meeting in January, held rates steady but noted that monetary policy would be revised in March next month. Earlier, in December last year, the markets expected the ECB to announce further QE expansion which saw the Euro fall to 1.056 but with Draghi and team only extending the QE purchase deadline while cutting deposit rates further into negative, the Euro surged due to the Central Bank falling short of market expectations.