European Central Bank policymakers on Thursday lowered their annual inflation and growth forecasts, as they confirmed a widely expected hold of interest rates.
Staff projections now see economic growth of 0.6% in 2024, from a previous forecast of 0.8%.
They presented a more positive picture on inflation, with the forecast for the year brought to an average 2.3% from 2.7%. Looking ahead, staff see inflation hitting the ECB’s 2% target in 2025 and cooling further to 1.9% in 2026.
That appeared to increase market bets on rate cuts taking place in the summer of this year, with the euro trading 0.35% lower against the British pound following the news.
On growth, the ECB forecast a gross domestic product expansion of 1.5% in 2025 and 1.6% in 2026, as the euro zone’s economic activity escapes its current stagnation. Germany, Europe’s largest economy, has already slashed its growth forecast for 2024 to 0.2%, down from a 1.3% estimate previously.
As the ECB has held rates at a record high since its September meeting, market participants have been eagerly awaiting the March projections for an indication on when it may begin cuts.
Its key rate is currently 4%, up from -0.5% in June 2022, following a run of 10 hikes.
Expectations have shifted to the June meeting, even as ECB staff stress they want to assess wage data from the spring before making a decision.
Euro zone inflation eased to 2.6% in February from 2.8% in January, showing continued progress towards the ECB’s 2% target. However, the core figure which strips out energy, food, alcohol and tobacco proved stickier, at 3.1%.
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