U.S. stocks are rallying on Friday following some dovish comments over the past 24 hours by European Central Bank President Mario Draghi to help inflation in the 19 member euro area to move closer to the ECB’s inflation target level.
The euro is under pressure following recent comments made by Draghi who explained there are “no limits” to what the central bank is prepared to do to get inflation up to its target just below 2 percent.
Respondents to the ECB’s Survey of Professional Forecasters (SPF, Q1 2016) have revised downwards their inflation expectations for 2016 by 0.3 percentage point to 0.7 percent, mostly reflecting oil price developments.
In the short term, respondents are expecting a strong dampening impact on inflation from the latest oil price developments, counteracting favorable base effects arising from past developments.
But most SPF respondents continue to forecast a strong inflation rebound in 2016 and 2017, including a gradually increasing underlying inflation which is shaped by the ongoing expansion of economic activity and supported by the an accommodative monetary policy stance.
Inflation is expected to accelerate in 2017 to 1.4 percent and in 2018 to 1.6 percent.
Real GDP growth expectations are unchanged in the 1.7-1.8 percent range for Q1 2016.
Unemployment rate forecasts have been revised downwards across and remain on a downward trajectory.
The forecast of the employment rate across the 19 member euro area is 10.3 percent, down from 10.5 percent last quarter.
Crude oil is staging a comeback on Friday following remarks about further easing measures by the European Central Bank and Japan’s central bank.
Yesterday European Central Bank President Mario Draghi said that the central bank “will need to review and therefore possibly reconsider” its monetary policy stance in March as downside risks have increased in 2016.
The ECB is maintaining overnight negative interest rates for banks alongside its € 60 billion a month asset purchase program.
Nikkei reported that the Bank of Japan is considering steps to counter the hit to inflation from crude oil’s slide.