European Central Bank Raises Inflation Projections, Cuts 2022 Growth Outlook

The European Central Bank has upwardly revised its inflation forecast and cut the growth outlook for next year, as persistent supply chain woes and fears over omicron variant threaten to slow down Europe’s economic recovery.

The ECB now anticipates inflation will exceed the bank’s 2% control range this year and in 2022, before dissipating below the target range in the proceeding two years. With respect to the current year, price pressures are now expected to surge to 3.2%— substantially above the 1.7% inflation rate previously forecast back in September. However, the central bank said that come 2023, the rate will fall back to 1.8%.

With respect to economic growth, the ECB warns that risks are “broadly balanced,” as Covid-19 restrictions “moderated” the eurozone’s GDP in the fourth quarter of 2021. The central bank’s president, Christine Lagarde, added that the sudden slowdown in output has delayed the timeline of the region’s economic rebound to pre-pandemic levels by several months, which is now not expected to be reached until sometime in the first three months of 2022.

The central bank slashed its growth forecast for 2022 to 4.2%, but raised output growth to 2.9% for the following year. At the same time, the ECB also decided to downsize its extensive emergency stimulus, announcing that the $2.2 trillion pandemic response program will cease net purchases by March 2022.

Information for this briefing was found via the ECB. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.