ECB to present economic outlook with little change

Frankfurt - The European Central Bank (ECB) has presented policy makers with updated economic forecasts that are largely unchanged from those published in September, according to officials familiar with the numbers.

Changes to the projections, which are based on estimates by the 19 national central banks, are marginal, the people said, citing documents circulated by the ECB before Thursday’s Governing Council meeting.

The people asked not to be identified because the predictions haven’t yet been released.

The ECB will revise down its 2017 inflation forecast to 1.6% from 1.7%, one of the people said. An ECB spokesperson declined to comment.

A confirmation of the ECB’s existing outlook for a continued, though weak, recovery would undermine the case of policy makers who see sluggish inflation as a reason for more stimulus. Instead, they’ll need to focus on as-yet-unrealised risks to explain any shift in policy.

ECB President Mario Draghi has all but promised action for Thursday. Options include a further cut in the deposit rate from minus 0.2%, and an expansion or extension of a €1.1trn asset-purchase programme.

The euro pared its decline on the news on Thursday. It traded at $1.0588 at 09:21 on Friday.

Credibility risk

In September, the ECB predicted growth would accelerate from 1.4% this year to 1.7% in 2016 and 1.8% in 2017. It saw the inflation rate rising from 0.1% in 2015 to 1.1% next year.

ECB Vice President Vitor Constancio said on November 25 that the revised forecasts will be key to the final decision on stimulus. Draghi told European lawmakers on November 12 that the projections would be one input into the monetary-policy meeting, alongside the work of ECB committees on potential measures.

Executive Board member Peter Praet, the ECB’s chief economist, said last month that the central bank was concerned that the date when it reaches its inflation goal of just under 2% will slip.

“And even if it’s slightly, it’s a repetition of a past pattern,” he said in a Bloomberg interview on November 16. “And then you go into the question of credibility of monetary policy.”