In our view, the ECB's current inflation forecast is too high due to its estimate for core inflation. The ECB expects core inflation to increase in 2014 andconsidering the profile during 2013 the forecast seems optimistic
A further lowering of the inflation projection would add additional pressure on the ECB as its forecast is low already. This is especially true if a new lower forecast is due to weaker core inflation, not the outlook for commodity prices.
Having said that, Mario Draghi has argued that more information about the medium-term outlook is needed, but in order to analyse this a good understanding of the starting point is needed.
In upcoming papers, we consider the medium-term inflation outlook and take a broader perspective and consider what the growth forecast likely implies. Finally, we look at what to expect of the ECB in this situation.
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