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The ECB sees inflation close to 1% in 2021

The Vice President of the ECB, Luis de Guindos, anticipates an inflation even weaker than the one presented in the September forecasts

Luis de Guindos, Vice President of the ECB

The ECB sees an inflation outlook even weaker than that presented in its most recent September forecast, with price growth likely to average around 1% next year, according to Vice President Luis de Guindos.

In comments posted less than two weeks before policy makers meet to restore their monetary stimulus, Guindos stated al periódico finlandés Helsingin Sanomat that inflation will be negative until the end of this year and revealed lower estimates for 2021.

“Overall, we expect inflation to approach 1% in 2021 and move towards 1.2% or 1.3% in 2022,” he said. In September, the ECB had forecast an average price growth of 1.3% for both years.

Possible contraction in the fourth quarter

The euro area economy has been hit by new coronavirus lockdowns in recent weeks and is likely to contract in the fourth quarter.

It is expected that on December 10 the ECB increase and extend its pandemic asset purchase program of 1.35 trillion euros, as well as offering more long-term financing to banks.

“These are the two main tools if the situation gets darker,” Guindos said in the interview. “The arrival of vaccines brings hope regarding the medium-term outlook.”

The ECB is also due to update its quarterly macroeconomic projections on December 10, which will include a first estimate of growth and inflation in 2023.