Lower ECB inflation outlook driven by stronger euro

Recent gains in the euro exchange rate against other major currencies have largely determined the European Central Bank’s lower outlook for inflation, the ECB said on Thursday.
The

euro hit a 15-month high in February as banks’ started to repay some of ECB crisis loans early and the euro zone economy began to show signs of stabilisation, complicating the ECB’s policymaking tasks by weighing on growth.
The ECB has said the euro’s exchange rate is not a policy target, but that it is important for growth and inflation.
The ECB’s March monthly bulletin, released on Thursday, showed that the stronger euro was a key reason behind a lowered inflation outlook for next year in March’s ECB staff projections.
“For 2014, the upper end of the range is slightly lower than in the December 2012 projection, mainly reflecting the impact of the stronger exchange rate of the euro,” the ECB said, with reference to the inflation forecasts.
“External price pressures have eased in recent months due to the appreciation of the euro. The annual growth rate of the import deflator is projected to fall in 2013, before stabilising slightly in 2014, as the downward impact of the stronger exchange rate of the euro is assumed to fade away.”

Πηγή: Reuters