Will ECB Achieve Its Inflation Target Until 2020?

Forex News

It is assumed, that the growth of the Eurozone inflation to the ECB's 2% target will take more time, than expected. Belgian policymaker Jan Smets said that to achieve the goal will take a little longer than expected earlier. Smets added that even if currency market volatility wasn’t touched much in ECB President Mario Draghi's news conference last week, the issue remains high on the agenda.

Consumer prices in the euro area rose by 1.2% in annual terms in February after an increase of 1.3% a month earlier. Thus, inflation has slowed to a minimum since 2016. Inflation in the euro area was below the target value since early 2013. Current forecasts of the ECB indicate that it will not return to the required value of just under 2% until 2020.

Last week, the ECB did not change the benchmark interest rate, keeping it at 0%. In October 2017, the ECB leadership decided to extend the duration of the quantitative easing program (QE) until September 2018, with a decrease in the monthly volume of redemption of bonds from January to 30 billion euros from 60 billion euros. The European Central Bank confirmed that the repurchase program will last until September, "or longer, if necessary," or "until the ECB's Board of Governors sees a stable inflation adjustment in line with its inflationary targets."

Still, the ECB should eventually revisit its policy framework and may have to tell markets how interest rates would rise as the guidance now only stipulates that rates would stay unchanged until QE ends.