Blog Post

Chart of the week: IMF forecasts euro area inflation to stay well below 2% target for years to come

The IMF recognizes that given the bleak outlook for the euro area real economy, if the ECB continues with its relatively hawkish monetary policy approach it will take 5 years for inflation to converge to just 1.5%.

By: and Date: October 14, 2014 Topic: European Macroeconomics & Governance

In the April 2014 update of the World Economic Outlook (WEO) released this week, the International Monetary Fund (IMF) forecasts a fall in the average inflation for the euro area to 0.9% in 2014, down from 1.3% in 2013. For 2015 and 2016, inflation is expected to remain well below the 2% policy rate, at approximately 1.2% and 1.3%. While the fall in inflation for 2014 was largely anticipated in recent estimates released by Eurostat, the IMF forecasts might be taken as further support for the claim that inflation will be lower than 2% in the medium term. Indeed, the IMF forecasts usually display a strong mean-reverting behaviour, i.e. a speedy convergence to the long term inflation rate, which in case of the euro area is anchored at below but close to 2%. This trend is quite apparent when we check the realized inflation against each year’s April forecasts from the IMF. This time however, the IMF recognizes that given the bleak outlook for the euro area real economy, if the ECB continues with its relatively hawkish monetary policy approach it will take 5 years for inflation to converge to just 1.5%.

Average euro area Inflation percent change in different vintages of IMF WEO

Source: IMF WEOs

Read more on the IMF’s forecasts

Looking past the (West’s) end of the nose

The global economy’s Groundhog Day

New IMF growth forecasts: EU revised downward, once again

The IMF’s false confession


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint. Anyone is free to republish and/or quote this post without prior consent. Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post.

View comments
Read article More on this topic More by this author

Podcast

Podcast

The Art of the Brexit Deal

An emergency Brexit podcast to dissect today's tentative deal between the EU27 and the British Government, featuring Maria Demertzis, Guntram Wolff and Nicholas Barrett

By: The Sound of Economics Topic: European Macroeconomics & Governance Date: October 17, 2019
Read about event More on this topic

Past Event

Past Event

Public finance - time for a quality check

Is the quality of fiscal expenses and revenues more important than the budget deficit?

Speakers: Maria Demertzis, Boris Cournede, Sven Langedijk and Francesco Papadia Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: October 16, 2019
Read article More on this topic More by this author

Opinion

Brexit and Finance: Brace for No Impact?

Amid the daily high drama of Brexit, it is easy to lose track of the structural shifts, or lack thereof, that may be associated with the UK’s possible departure from the European Union. One of them, and not the least, is the potential impact on the European and global financial system.

By: Nicolas Véron Topic: European Macroeconomics & Governance Date: October 14, 2019
Read article More on this topic

Blog Post

Cross-border, but not national, EU interregional development projects are associated with higher growth

Our calculations reveal that places where EU regional development projects bind together participants from different countries experience higher economic growth. Purely national interregional projects, on the other hand, are not associated with such benefits. The results hold across regions of different levels of income and consider the effects of other growth-determinants. Cross-border projects might bring efficiency gains, unlock synergies and provide knowledge transfers, boosting activity, with gains going beyond the projects’ scope. Cross-border projects could provide perhaps the only rationale for the continued cohesion/regional funding of more developed regions.

By: Zsolt Darvas, Jan Mazza and Catarina Midoes Topic: European Macroeconomics & Governance Date: October 14, 2019
Read about event

Upcoming Event

Nov
4
08:30

What industrial policy for the European Green Deal?

This event will be a workshop, aiming to look into the design and implementation process of the European Green Deal. Each session will be introduced by three short presentations aimed at launching the discussion among all workshop participants.

Speakers: Jos Delbeke, Bertrand Déprez, Markus Hess, Kerstin Jorna, Laura Piovesan, Megan Richards, Simone Tagliapietra, Kurt Vandenberghe and Reinhilde Veugelers Topic: Energy & Climate, European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article More on this topic More by this author

Podcast

Podcast

Brexit: a European Odyssey

Nicholas Barrett and Guntram Wolff talk to Kalypso Nicolaïdis, author of Exodus, Reckoning, Sacrifice: Three Meanings of Brexit. Together they discuss the mythology that binds Britain to continental Europe

By: The Sound of Economics Topic: European Macroeconomics & Governance Date: October 11, 2019
Read article Download PDF More on this topic More by this author

Policy Contribution

With or without you: are central European countries ready for the euro?

The debate on euro adoption by central European EU countries has intensified in the last years. In this Policy Contribution the author does not review all the complex aspects of euro-area enlargement, but analyse a particularly important issue: the build-up of macroeconomic vulnerabilities and the subsequent adjustments.

By: Zsolt Darvas Topic: European Macroeconomics & Governance Date: October 10, 2019
Read article More on this topic More by this author

Blog Post

Long term real interest rates fell below zero in all euro area countries

The 10-year real government bond yield, which is the nominal yield deflated by expected inflation, has fallen below zero in Italy and Greece, boosted by increased market confidence for their new governments. Romania is the only remaining EU country with a positive real interest rate. Negative real interest rates vastly help fiscal sustainability and provide a great opportunity to invest in much needed infrastructure and the transition to a carbon-neutral economy.

By: Zsolt Darvas Topic: European Macroeconomics & Governance Date: October 8, 2019
Read article More on this topic More by this author

Opinion

Europe: en finir avec la politique en silos

Projetée dans un monde de rapport de force dont les principaux protagonistes ne séparent pas géopolitique et économie, l’UE va devoir conduire un changement de logiciel culturel, une mutation organisationnelle et un rééquipement opérationnel, explique l’économiste Jean Pisani-Ferry.

By: Jean Pisani-Ferry Topic: European Macroeconomics & Governance Date: October 8, 2019
Read article More on this topic More by this author

Opinion

The Case for Intelligent Industrial Policy

Although national industrial policies have a bad reputation, there is a strong case for government support to sectors that will increasingly rely on artificial intelligence. In this regard, the German government’s plan to promote production of electric-car batteries may accelerate an industrial renaissance in Europe.

By: Dalia Marin Topic: European Macroeconomics & Governance Date: October 7, 2019
Read about event More on this topic

Past Event

Past Event

A fresh perspective on EU-Turkey relations: still a possibility?

Examining the mutual benefits of a EU-Turkey customs union.

Speakers: Zeynep Bodur Okyay, André Sapir, Sinan Ülgen and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: October 3, 2019
Read article More by this author

Blog Post

Why structural balances should be scrapped from EU fiscal rules

A prominent team from DG ECFIN of the European Commission challenged some of the criticisms of the EU’s methodology for estimating potential output and output gaps, as well as their role in the EU fiscal framework. In this post, I conclude that their responses to the criticisms they considered are questionable. More importantly, they overlook serious problems with the EU’s potential output methodology.

By: Zsolt Darvas Topic: European Macroeconomics & Governance, Finance & Financial Regulation Date: October 1, 2019
Load more posts