Luis De Guindos, Vice president of ECB, said that the European Central Bank expects prices in the euro zone to continue to fall this year and rebound more slowly in 2021 than it previously thought even as the prospect of a coronavirus vaccine increases the growth outlook. On Dec 10th the ECB is due to display its new projections, along with a new stimulus package. De Guindos’ comments indicate a cut to the inflation forecast for this year, next year and possibly even 2022 is probable.
“Inflation will be negative until the end of the year and we expect that it will turn positive next year,” de Guindos told Finnish newspaper Helsingin Sanomat. “All in all, we expect inflation to be close to 1% in 2021 and to see it moving up towards 1.2% or 1.3% in 2022.”
Christine Lagarde’s deputy also confirmed consensus expectations for a shrinking in the euro zone economy this quarter but said the likelihood of a vaccine against the coronavirus signified the outlook appeared brighter.
De Guindos said, “Negative quarter-on-quarter growth is now the most realistic scenario for the end of the year.” “But the medium-term outlook – mainly because of the ray of hope brought by news of the vaccine – looks brighter.”
In September the ECB said it saw euro zone inflation at 0.3% in 2020, 1.0% in 2021 and 1.3% in 2022 while it expected real GDP to fall by 8.0% this year before rebounding by 5.0% in 2021 and by 3.2% in 2022.
The central bank declared that it will announce the terms of its new stimulus package in December.