Core inflation in the Eurozone is likely to intensify in the coming months against the backdrop of the expected acceleration of wage growth.
The ECB expects the strengthening of core inflation in the Euro area against the background of accelerating wage growth
This was stated by the head of the European Central Bank (ECB), Mario Draghi, speaking at the Committee on economic and monetary policy of the European Parliament, Biznestsentr reports with reference to Interfax-Ukraine.
"So, the rate negotiated with employers increasing salaries in the Eurozone in the second quarter of 2018 was 2.2% compared with 1.7% in the first quarter and 1.5% in 2017. This supports our belief that the wage growth will continue to accelerate," said Draghi.
"The annual growth rate of consumer prices (harmonized index of consumer prices, HICP) is likely to stay around current levels in the coming months and are expected to reach 1.7% in each of the years up to 2020," he said.
"This price stability is due to the expected reduction in the contribution of non-key components (including oil prices and food products) to overall inflation, as well as a fairly significant increase in core inflation in the Euro area", - said the head of the ECB.
See also: European Central Bank introduced new banknotes of 100 and 200 euros. PHOTO
According to the forecast of the Central Bank, core inflation (excluding food and energy) will reach 1.8% in 2020.
"Inflation in the Euro area (HICP) in August slowed to 2% compared to 2.1% in July. The index remains above levels of the beginning of this year due to a significant rise in oil prices. The indicator of core inflation increased at a slower pace than the main index, however, accelerates the growth against the background of growing price pressure," Draghi said.
He noted the continued comprehensive growth while maintaining high levels of capacity utilization and the strengthening of the labour market. Against this background, disposable income of consumers in the Euro area is currently growing at the fastest pace in ten years, said Draghi.
"Income growth supports private consumption, which is expected to increase by 1.5% in 2018. This, along with business investment, stimulated by favourable financing conditions and rising corporate profits and steady demand, will continue to support spending," he said.
The latest forecasts of the ECB envisage a Eurozone GDP growth of 2% in 2018 and 1.8 percent in 2019, and 1.7% in 2020. Expectations of a slowdown of economic growth in 2019 and 2020 years are associated mainly with the deterioration of the situation in the sphere of global trade.
"The risks for the Eurozone economy as a whole are balanced, but the threat of protectionism, unrest in emerging markets, and volatility in the financial markets have recently become more noticeable," - said Draghi.
He confirmed that the ECB plans to cut monthly bond-buying programme quantitative easing (QE) to 15 billion euros to 30 billion euros in October and completed in December of this year.
"This does not mean that our policy will cease to be challenging," added Draghi.
Key interest rates will remain at current levels until at least the end of the summer 2019 and, in any case, as long as there is a need to ensure the continued movement of inflation in the Eurozone to the target level of the ECB (2%), he said, repeating the text, earlier announced by the Central Bank.
Draghi also noted that the control of market expectations concerning monetary policy through the publication of forecasts and recommendations (forward guidance) has become an important tool for all the world's major Central banks, as traditional monetary policy has reached the lower limit of effectiveness, and the ECB in this case is no exception.
The Euro against the U.S. dollar rebounded on ECB statement: traders took it forecast the gain in core inflation as a signal that the ECB, in accordance with their own plan, moving to rise rates next year.
Subscribe to Biznestsentr in Facebook, Twitter and Telegram
See comments →