ECB Projects Euro-Are Inflation to Fall Below Target in 2023, Warns of Headwinds

Source: Bloomberg

European Central Bank is projecting that the euro area inflation will average 1.4% in 2023, below the target 2%. The central bank puts 2021 consumer prices to rise by 2.4% and 2.2% next year. DAX is up +0.089%, EURUSD is down -0.08%

• ECB still says the present elevated inflation is transitory and is linked to the economic reopening and continuing economic adjustment.
• The central bank expects energy costs to peak in the coming months while wage growth will remain subdued until the excess capacity in the labor market subsides. 
• The bank sees an economic growth rate of 5% in the euro area this year, which will fall to 4.3% in 2022 and further to 2.4% in 2023.
• The monetary authority still warns that inflation may go higher if the existing supply constraints persist and above-productivity increases in wages are passed on to the consumer.
• ECB also cites a fresh spike of Covid cases as possible headwinds which could offset the recovering euro area economy. 
• Investors will now turn attention to the ECB meeting in December where the officials will outline policy for its asset-purchase program amid rising price pressures.