ECB raises eurozone growth and inflation forecasts

ECB president Christine Lagarde said the eurozone was on track for strong growth in the third quarter of this year and that the ECB sees economic activity at its pre-pandemic level by year-end. File picture

The ECB has raised its growth and inflation projections for this year and beyond as the eurozone economy recovers from the Covid crisis more quickly than expected.

ECB president Christine Lagarde said the eurozone was on track for strong growth in the third quarter of this year and that the ECB sees economic activity at its pre-pandemic level by year-end.

She said although the inflation outlook for this year had been revised upwards, to above the ECB's 2% target, the current increase was expected to be temporary and medium-term inflation was seen still well below target.

The ECB said it would trim emergency bond purchases over the coming quarter, but denied it was tapering emergency support for the eurozone economy.

GDP to expand by 5%

In what it describes as the baseline scenario, the ECB expects eurozone GDP to expand by 5% this year, above the 4.6% seen in June, while growth next year is seen at 4.6%, largely unchanged from the ECB's previous 4.7% projection. 

Its inflation forecast for this year was raised sharply, mostly because of higher commodities prices, production bottlenecks and a surge in consumption. But consumer price growth further down its projection horizon remains below 2%.

Inflation is now seen averaging 2.2% this year, above the 1.9% projected in June, while in 2022 it is seen at 1.7% against an earlier projection for 1.5%.

• Reuters