Investing.com – The euro hit intraday lows on Wednesday as a report surfaced that the European Central Bank (ECB) would cut inflation forecasts for the next three years, sparking speculation that the euro area monetary authority will maintain its dovish stance.
Weaker energy prices forced the ECB staff to reconsider its projections for inflation for 2017 to 2019, according to a Bloomberg report citing people familiar with the matter.
These sources said that the ECB draft forecasts were pointing to inflation of just 1.5% through 2019, compared to its prior estimates released in March of 1.7% for this year, 1.6% for 2018 and 1.7% for 2019.
The ECB targets inflation to be "close to, but below 2%".
Forecasts for core inflation were said to be little changed while growth projections were expected to be revised up by about 0.1%, according to the report.
In its prior projections in March, the ECB said that inflation excluding energy and food was “envisaged to average 1.1% in 2017 and to rise to 1.5% and 1.8% in 2018 and 2019 respectively”.
ECB president Mario Draghi has often insisted that underlying inflation remains subdued, backing the need for an “extraordinary amount of monetary policy support”.
Meanwhile, the central bank said last March that real GDP was expected to grow by 1.8% in 2017, by 1.7% in 2018 and by 1.6% in 2019.
The ECB will release its official updated projections with its monetary policy announcement on Thursday.
The euro sold off as the news hit the wires, hitting an intraday low of 1.1206 against the dollar. EUR/USD was last down 0.62% at 1.1207 by 6:57AM ET (10:57GMT). EUR/GBP fell 0.52% to 0.8688, while EUR/JPY lost 0.58% to 122.66.