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ECB: Belatedly Accepts Reduced Downside Risks
- Surprising few, the ECB kept policy on hold at its June meeting. There was little new in the statement or in the ensuing Q&A save for a belated acknowledgement that the downside growth risks have eased somewhat, this more explicitly recognized in terms of the upward revision the ECB made to its GDP and HICP inflation projections, at least for 2016.
- Even so, revisions were made only to 2016 projections. This time around, the 2016 GDP forecast was revised back up to 1.6%: DE actually sees a 2016 outcome as high as 1.8%! However, the ECB made no change to its 2017 growth projection and actually pared back its 2018 GDP growth projection a notch (also to 1.7%)! This is puzzling for two reasons.
- All of which suggest that further policy measures (while not being ruled out) are not under active consideration, especially as the ECB will wish to see any impact from the TLTRO and corporate bond purchase program that are due to start this month.