Zsolt Darvas, (2018), “ECB’s huge forecasting errors undermine credibility of current forecasts”, Bruegel, 6 Δεκεμβρίου
In its latest projections, on September 13th 2018, ECB staff foresaw a core inflation increase to 1.5% on average in 2019 and further to 1.8% on average in 2020 (core inflation does not include volatile items like energy and food).
Such forecasts, along with the renewed euro-area economic growth and the fall in the unemployment rate, constituted an argument in favour of an important monetary policy normalisation step – namely, the announced termination of net asset purchases by the end of December 2018. The timing of the first interest-rate increase might also be informed by forecasts.
How much trust should we have in the current ECB forecast? In a forthcoming paper I analyse ECB forecasts in some detail, yet let me present the two most important charts in this blog post: core inflation and unemployment rate.
I focus on core inflation and not on headline inflation, because core inflation represents the underlying inflationary pressure. A central bank has hardly any influence over the items excluded from core inflation (energy and food prices), which are primarily driven by outside factors such as weather and supply/demand conditions on global energy markets (in my forthcoming paper I assess other forecasts too: headline inflation, GDP growth and wage growth). The recent work of Grégory Claeys, Maria Demertzis and Jan Mazza also proposed to focus on core inflation.
Σχετικές Αναρτήσεις
- Gregory Claeys, Maria Demertzis and Jan Mazzaa, (2018), «Monetary policy framework for the European Central Bank to deal with uncertainty», Bruegel, 22 Νοεμβρίου
- Ioana A. Duca, Geoff Kenny, Andreas Reuter, (2018), «Inflation expectations, consumption and the lower bound: micro evidence from a large euro area survey», ECB Working Paper Series, No. 2196, Νοέμβριος