Inflation expectations revised down slightly for 2021 and 2022 but remain broadly unchanged for the longer term. The average USD/EUR exchange rate was expected to appreciate very marginally, from around 1.18 in the fourth quarter of 2020 to 1.19 in 2021, and further to 1.20 in 2022. Density characteristics and density forecast performance: a panel analysis (Kenny, G. et al. More specifically, for 2020, respondents cited the better than expected economic data for the second and third quarters of 2020 as the main factor behind the slightly less negative outlook. Across all horizons, the probability distributions are skewed towards higher unemployment rate outcomes and the balance of risks is perceived to be to the upside. Inflation expectations for 2020 and 2021 were revised down by 0.1 percentage points to 0.3% and 0.9% respectively. mitigation measures, uncertainty surrounding expectations for euro area inflation, growth and unemployment remained elevated in the fourth quarter of 2020 ECB Survey of Professional Forecasters (SPF). The probability distribution for 2025 remained largely unchanged. As with their expectations for headline inflation, respondents on average see the balance of risks to their HICPX expectations as being to the downside. It is conducted four times a year, in January, April, July and October. This occasional paper provides an initial assessment of the information content of the results from the first eight years of the Survey of Professional Forecasters. However, due to the emergence of new COVID-19 cases in the recent weeks, many forecasters now assumed a weaker fourth quarter 2020 and that the economy would remain affected by restrictions (albeit not complete lockdowns) well into 2021. Second, a number of respondents cited the risk of a continued weakness of consumer spending and corporate investment and a rise in insolvencies, particularly should governments withdraw fiscal support “too soon”. Uncertainty also decreased for the expected recovery in 2021, resulting in a more clearly unimodal distribution, more concentrated around growth of between 4% and 6%. Although mean expectations declined somewhat, they remained quite well anchored to the ECB’s price stability objective and their degree of co-movement with other variables did not increase noticeably. Summary Reflecting the ongoing impact of the coronavirus (COVID-19) pandemic and mitigation measures, uncertainty surrounding expectations for euro area inflation, growth and unemployment remained elevated in the fourth quarter of 2020 ECB Survey of Professional Forecasters (SPF). [1] HICP inflation expectations were 0.3%, 0.9% and 1.3% for 2020, 2021 and 2022 respectively. Overall, it finds considerable heterogeneity in the performance of the surveyed densities at the individual level. Expectations for HICPX were revised down by 0.1 percentage points for both 2020 and 2021 but unchanged for 2022. Downloadable! Distribution of point expectations for HICP inflation in the longer term, (x-axis: longer-term HICP inflation expectations, annual percentage changes; y-axis: percentages of respondents). Respondents reported that the balance of risks to their baseline inflation outlook was largely to the downside. Excel data for all charts can be downloaded here. Respondents cited fears regarding a further widespread wave of infections and lockdowns as well as the general level of uncertainty as possible factors holding back economic activity and consequently inflation. The Statistical Data Warehouse (SDW) is a platform where euro area statistics, including in some cases national breakdowns are made available. This chart shows the average probabilities they assigned to different ranges of unemployment rate outcomes for 2020, 2021 and 2022. “Sep 2020 MPE” denotes the September 2020 ECB staff macroeconomic projections. Thus the histogram should span the entire range 0-2%, with all elements between 0.0% and 1.4% having same value of 5.6% (i.e. This chart shows the average probabilities they assigned to different ranges of unemployment rate outcomes in the longer term. Longer-term inflation expectations (for 2025) were 1.7% (compared with 1.6% in the previous round). measures and continuing uncertainties, expectations for euro area inflation, growth and unemployment were all revised further in the latest (Q3 2020) ECB Survey of Professional Forecasters (SPF). RTTNews . ECB’s Guindos Says Outlook For Euro Area A Little Bit Brighter Knot: Recent Data Solidify Confidence in ECB Baseline Scenario ( Updates with ECB survey in sixth, Rehn in seventh paragraph. [4], Aggregate probability distributions for expected inflation in 2020, 2021 and 2022, (x-axis: HICP inflation expectations, annual percentage changes; y-axis: probability, percentages). The ECB Survey of Professional Forecasters (SPF) collects information on the expected rates of inflation, real GDP growth and unemployment in the euro area at several horizons, ranging from the current year to the longer term. Find out how the ECB promotes safe and efficient payment and settlement systems, and helps to integrate the infrastructure for European markets. Browse the ECB’s reports, publications and research papers and filter them by date or activity. Learn more about how we use cookies, We are always working to improve this website for our users. This chart shows the average probabilities they assigned to different ranges of real GDP growth outcomes in the longer term. This paper examines the link between the characteristics of SPF macroeconomic density forecasts (such as their location, spread, skewness and tail risk) and density forecast performance. Learning from the SPF has remained a useful input for the ECB’s economic analysis and monetary policy. (2007), ECB Occasional Paper 59). In their qualitative comments the majority of respondents continued to focus on downside risks. 18 respondents provided quantitative answers to this question. The upper and lower regions of the predictive densities for inflation are much less informative. This was particularly the case for the one-year and two-year ahead horizons. Such findings are in line with the predictions of theoretical models emphasising the impact of the lower bound on policy rates and uncertainty about monetary transmission. Respondents indicated that the lowered expectations for 2020 reflected the impact of special measures providing temporary protection against unemployment. The main objective of the paper is to investigate if the forecasts for 2025, averaged 1.7%, compared with 1.6% in the previous round. For 2022 point forecasts have been revised up on average by 0.3 percentage points Longer-term growth expectations (which refer to 2024) remained stable at 1.4%. This situation reflects participants’ uncertainty about how the impact of the virus on the macroeconomy will evolve and about the impact of special protection schemes. Notes: The SPF asks respondents to report their point forecasts and to separately assign probabilities to different ranges of outcomes. In its communication, the Governing Council needed to: (a) stress that the incoming information signalled that the euro area economic recovery was losing momentum and that the rise in COVID-19 infections and the associated intensification of containment measures was weighing on economic activity, constituting a clear deterioration in the near-term outlook; (b) emphasise that … The Survey of Professional Forecasters began in 1999. Notes: The SPF asks respondents to report their point forecasts and to separately assign probabilities to different ranges of outcomes. The average longer-term forecast (for 2025) was, at 7.6%, 0.1 percentage points lower than in the previous round. The latest ECB survey of professional forecasters downgraded inflation outlook to 1.5 percent this year, 1.4 percent in 2018, and 1.6 percent in 2019. These figures for 2020 and 2021 are the same as they were in the previous (Q4 2019) survey round. Annual HICP inflation is seen averaging 1.5 percent this year, the ECB Survey of Professional Forecasters for the first quarter showed. Taking a slightly longer perspective, following four rounds of downward revisions in 2019 by a cumulative 0.2 percentage points, average longer-term expectations remained at historical low levels in a narrow range (1.64-1.67%) during 2020. They generally expect the negative demand impact to outweigh any possible (upward) supply-side effects. Conversely, for the inflation rate there is stronger evidence that more refined combinations can lead to improvement on this benchmark. Overall, rate expectations were essentially unchanged from the previous round (see panel (a) of Chart 13). In the context of the current review of the ECB’s monetary policy strategy, SPF respondents were asked “what is the level or range of inflation that, according to your view, is in line with the ECB’s price stability objective?”[5] Nearly all respondents to the question – see Figure A – believed the objective to be flexible, i.e. [] HICP inflation expectations stand at 0.4%, 1.0% and 1.3% for 2020, 2021 and 2022, respectively. Dig deeper into the ECB’s activities and discover key topics in simple words and through multimedia. Notes: The blue bars depict the inflation rate or range of inflation rates that, according to the respondent’s view, is in line with the ECB’s price stability objective. Controlling for the effects of common macroeconomic shocks, cross-sectional and fixed-effect panel regressions are applied to link density characteristics and density forecast performance. <-1.0% and >4.0%). Oil price expectations for the fourth quarter of 2020, at USD 42 per barrel, were the same as reported in the previous round. Furthermore, participants are asked to provide their assumptions underlying these forecasts, for the oil price in US dollars, the exchange rate … The survey began in January 1999 and as such is the longest-running survey of euro area macroeconomic expectations. Professional forecasters have cut their projections for euro area growth and inflation for this year and next, results of a quarterly survey by the European Central Bank showed on Friday. Survey results published by the European Central Bank (ECB) on Friday showed that many professional forecasters had revised down eurozone's annual inflation and GDP growth expectations, particularly for 2020. The European Central Bank said professional forecasters expect the euro-area economy to contract this year, slashing their projections. [] HICP inflation expectations stand at 0.4%, 1.0% and 1.3% for 2020, 2021 and 2022, respectively. The ECB – assisted by the national central banks (NCBs) and other national (statistical and supervisory) authorities of the European Union – develops, collects, compiles and disseminates statistics. Aggregate probability distribution for longer-term GDP growth expectations. Unemployment rate expectations revised down across all horizons. See what has changed in our privacy policy, Shorter-term HICP inflation expectations largely unchanged, Longer-term inflation expectations broadly unchanged, Real GDP growth expectations revised towards a slightly milder downturn in 2020 and rebound in 2021, Unemployment rate expectations revised down across all horizons, Financial stability and macroprudential policy, Euro area economic and financial developments by institutional sector, Euro area insurance corporation statistics, Euro area financial vehicle corporation statistics, Webcasts: hearings at European Parliament, Meetings of the Governing Council and the General Council, Banking Industry Dialogue on ESCB statistics, Implementation of ESA 2010 in euro area accounts, About the Statistical Data Warehouse (SDW), Selected euro area statistics and national breakdowns, Credit institutions and money market funds, Estimated MFI loans to NFCs by economic activity (NACE), Financial corporations engaged in lending, Long-term interest rate statistics for convergence purposes, Financial integration and structure in the euro area, Balance of payments and other external statistics, Balance of payments and international investment position, International reserves and foreign currency liquidity, Cross-border collateral in Eurosystem credit operations, Payment services, large-value and retail payment systems, Securities trading, clearing and settlement, ECB survey of professional forecasters (SPF), Survey on the access to finance of enterprises (SAFE), Household finance and consumption survey (HFCS), Survey on credit terms and conditions in euro-denominated securities financing and over-the-counter derivatives markets (SESFOD), Emergency liquidity assistance (ELA) and monetary policy, Securities settlement systems and central counterparties, Other infrastructures and service providers, Advisory groups on market infrastructures, Debt Issuance Market Contact Group (DIMCG), European Forum for Innovation in Payments (EFIP), I understand and I accept the use of cookies, See what has changed in our privacy policy. This represents downward revisions of 0.1 percentage points for each horizon relative to the previous survey. Twenty years of the ECB Survey of Professional Forecasters (de Vincent-Humphreys et al. A pseudo real-time out-of-sample performance evaluation of these alternative combinations is provided, and a check of the sensitivity of the results to possible data snooping bias using a novel real-time meta selection procedure not subject to the data snooping critique. Discover more about working at the ECB and apply for vacancies. The euro zone economy may shrink less this year than feared but its rebound is also likely to be more shallow, the European Central Bank's Survey of Professional Forecasters showed on Friday. The survey began in 1968 and was conducted by the American Statistical Association and the National Bureau of Economic Research. In anticipation of the expected substantial revisions to the growth outlook and the considerable uncertainty surrounding them (e.g. The most cited downside risk continued to be that of a further worsening of the pandemic, potentially resulting in new lockdowns. HICP inflation expectations stand at 1.2%, 1.4% and 1.5% for 2020, 2021 and 2022, respectively. Respondents expected: (i) oil prices to increase from around USD 42 per barrel in the fourth quarter of 2020 to slightly above USD 50 per barrel by 2022; (ii) the euro to appreciate very slowly against the US dollar in the period to 2022; (iii) the ECB’s main policy rates to remain low until at least 2022; and (iv) nominal wage growth to rebound in 2021 and reach 2.4% by 2025.