Economic growth in the euro zone was almost twice as fast as it was in the U.S. in the first quarter of 2017, raising the question whether more stimulus was required as the recovery appears to be self-sustaining.
“The upswing is becoming increasingly solid, and continues to broaden across sectors and countries, ” Peter Praet, the ECB’s chief economist, said in a speech May 24.
“The dispersion of growth rates across both countries and sectors is at its lowest level in two decades, reflecting a convergence of growth rates around higher levels,” he added.
But before getting carried away by economic optimism which would vindicate a rather sooner than later exit from extraordinary measures, the real driver for the monetary policy setters at the ECB is inflation.
Inflation in the euro zone slipped to 1.4 percent in May, its lowest reading since December, and also more than expected. So-called core inflation – stripped of energy and unprocessed food prices – also fell to 1 percent from 1.2 percent. This is clearly supporting the doves in the Governing Council who call for longer than shorter stimulus.
At the upcoming meeting in Tallinn, Estonia, the ECB will also present a new round of staff projections for inflation and growth.