ECB Growth Predictions: Ending Bond-Buying, Slower Economy, Deflation in Check

Written by | Wednesday, January 2nd, 2019
@Eubulletin

The growth of the global economy is expected to slow down in 2019 and stabilize in the following years, the European Central Bank (ECB) informed last week. The ECB said that it expected prices to go up. Stakeholders have been preparing for a slowdown, mainly driven by higher borrowing costs for dollar debtors and trade quarrels between the United States and China. The ECB supported that expectation in regular economic bulletin but still pointed out to the likely “inflationary pressures” globally and in the Eurozone.

 

“Looking ahead, global economic activity is expected to decelerate in 2019 and remain steady thereafter,” the ECB said, adding that “global inflationary pressures are expected to rise slowly as spare capacity diminishes.” The ECB has also decided to put an end to its €2.6 trillion bond-buying programs but keep on reinvesting the money that it receives from maturing papers for a long time after its first rate hike. The decision was criticized by some analysts as not timely, given the weakening economy.

 

Yet, the bank reaffirmed its confidence that core prices would continue to rise in the euro area. Economists say that the program has helped boost growth, create millions of jobs and set inflation back on the path towards its target of just below 2%. The ECB had achieved this goal in 2015-2018 by buying €2.6 trillion of government and corporate debt, which had also politicized the bank in an unprecedented manner. “Underlying inflation is expected to increase gradually over the medium term, supported by the ECB’s monetary policy measures, the continuing economic expansion and rising wage growth,” the ECB said.

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