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ECB Nudges Up Inflation, Growth Forecasts for 2016

Economic Indicators Reuters

The European Central Bank nudged up its inflation forecast for 2016 on Thursday and predicted price growth would remain below its target through 2018 as it struggles with cheap energy feeding into the price of other goods and services.

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The ECB raised its 2016 inflation projection to 0.2 percent from 0.1 percent seen in March and kept its 2017 forecast at 1.3 percent, ECB President Mario Draghi said as he presented quarterly staff forecasts.

For 2018, the end of its forecast horizon, the ECB stuck to its prediction for an inflation rate of 1.6 percent - still short of its target of almost 2 percent.

Inflation has undershot the target for three years and will likely stay below it for more than three more year.

The bank also made modest adjustments to its GDP growth projections after the euro zone economy outperformed expectations in the first quarter and recent data indicated that consumption is holding up well, confidence is rising and investments are rebounding.

The following are the ECB staff's new projections for inflation and GDP growth. Previous figures, from March, are in brackets.

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(Reporting by Balazs Koranyi; Editing by Hugh Lawson)