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ECB presented new macroeconomic forecasts
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Smaller drop in GDP expected in 2020 followed by slower growth in 2021
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EURUSD tested 1.19 on FX rate comments
Press conference of ECB President Christine Lagarde started at 1:30 pm BST. Central banker stressed that the coronavirus pandemic had a negative impact on the economy but incoming data suggests strong rebound going forward with domestic demand recovering significantly. However, there is a high degree of uncertainty tied to projections. Lagarde said that the ECB sees no reason to overreact to recent euro strength. Still, the ECB will monitor developments on the FX market.
New forecast for 2020
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GDP: -8% vs -8.7% in June
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HICP: 0.3% vs 0.3% in June
New forecast for 2021
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GDP: +5% vs 5.2% in June
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HICP: 1% vs 1% 0.8% in June
New forecast for 2020
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GDP: +3.2% vs +3.3% in June
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HICP: 1.3% vs 1.3% in June
Lagarde said that risks to the growth outlook remain tilted to the downside while headline inflation should turn positive in the early 2021. As hinted by earlier media reports, changes to the forecasts were minor but increase in inflation forecasts for 2021 came as a small surprise. Responding to questions, Lagarde said that a stronger euro puts negative pressure on prices but also repeated that ECB's goal is to maintain price stability, not target FX rate.
EURUSD jumped towards 1.19 after Lagarde said there is no need to overreact to euro gains. Source: xStation5
