Prime News: Weak Inflation Data to Weigh on ECB’s Ultra-Easy Monetary Policy

Consumer prices in Germany, Italy and Portugal increased less than expected in April, data showed, raising new questions about the European Central Bank’s plans to discourage the eurozone off its supply of easy money.

The ECB has been widely expected to taper its 2.55 trillion euro bond-purchasing program by the end of the year and its President, Mario Draghi, expressed confidence in the economic outlook after last week’s policy meeting.

However, a string of weaker-than-expected economic indicators since the beginning of the year has been casting a shadow on the ECB’s plans, which are predicated on eurozone inflation hovering around 1.5 percent in the remainder of the year.

Price growth in Italy and Portugal was only 0.6 percent and 0.4 percent respectively this month, according to preliminary estimates published.

Germany’s reading was closer to the mark at 1.4 percent but still came in below analyst expectations, raising the prospect of a new disappointment when data for the eurozone as a whole is published.

One key issue will be the uneven picture in different countries, with Germany closer than most to the ECB’s target of just under 2 percent. Spanish inflation data had disappointed on Friday at 1.1 percent, while France provided the only positive surprise with a reading of 1.8 percent.

ECB policymakers from Germany and the Netherlands have long called for a rapid winding down of bond purchases, which would then pave the way for higher interest rates.

Following the mixed readings, economists at Barclays trimmed their eurozone inflation forecast for April by 10 basis points to 1.3 percent on Monday, bringing it in line with the median estimate in a Reuters poll of economists.

The material has been provided by InstaForex Company – www.instaforex.com

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