ECB President Christine Lagarde also said the ECB saw risks to growth as “broadly balanced”, a shift away from the ECB’s long standing assessment of risks as tilted to the downside.
In what it describes as the baseline scenario, the ECB expects GDP to expand by 4.6 per cent this year, above the 4 per cent seen in March, while growth next year is seen at 4.7 per cent against the ECB’s previous 4.1 per cent projection.
Its inflation forecast for this year was raised sharply, mostly because of higher commodity prices, but consumer price growth beyond 2021 is seen remaining well short of the ECB’s almost 2 per cent target, the fresh figures show.
Inflation is now seen averaging 1.9 per cent this year, above the 1.5 per cent projected in March, while in 2022 it is seen at 1.5 per cent, against an earlier projection for 1.2 per cent.
Lagarde said underlying inflation was expected to increase gradually but that price pressures would remain subdued and slack in the economy would keep inflation below the ECB’s target of just under 2 per cent through 2023.
She said the ECB expected economic activity to accelerate in the second half of 2021 but that the course of the pandemic and responses to it would continue to dictate the pace.
Inflation would rise further in H2 before falling back as transitory factors fade, Lagarde added. The following are the ECB’s quarterly growth and inflation projections through 2023.
