ECB forecasted negative inflation
The appreciation of the single currency as well as the sharp decline of oil prices led the European Central Bank to revise its forecast for the euro area’s inflation.
The ECB reduced its annual inflation forecast from 0.3% to 0.1%. Draghi said that he didn’t rule out negative inflation, but pointed out that it wouldn’t last long. Low energy prices should encourage consumer spending as well as business investment.
Draghi underlined that the regulator would use all the tools it has if the euro area’s economy needed further stimulus. He pointed out downside risks for the region’s economic growth coming from the volatility at the emerging markets.
EUR/USD slid from 1.1225 to 1.1100 on the ECB’s dovish comments.