ECB Raises Inflation Forecast; Greek Debt Talks Uncertain

ECB Says QE is Working WellEuropean Central Bank (ECB) President Mario Draghi said on Wednesday, June 3, 2015 in Frankfurt that the bank would maintain a steady policy and outlook through bond market volatility. He also said that the ECB is ready to provide more economic stimulus to ensure it meets its inflation target. (Source: European Central Bank, June 3, 2015.)

According to the European Union’s statistics agency, annual inflation in the eurozone was 0.3% in May. However, the inflation rate was still far below the ECB’s target, near two percent. This was the first rise in six months and a significant improvement over the 0.6% contraction in prices that occurred in January. (Source: European Union Statistics Agency, last accessed, June 3, 2015.)

The ECB started the monthly 60.0 billion euro (USD$66.0 billion) quantitative easing (QE) program in March, which is expected to last through the summer of this year. QE is a tool of monetary policy implemented by central banks to stimulate and control the economy when regular monetary policy has become ineffective.

The ECB president added that policy makers would have to be convinced that inflation will remain at its target level before halting their bond purchases. Draghi also said the bank wouldn’t be content with just one or two months in which the inflation rate was close to two percent. As he stated, “The full implementation of all our monetary policy measures will provide the necessary support to the euro area’s economy.”

Greek Debt Talk Remains Uncertain

Greece’s debt talk with its creditors remains uncertain. Greece’s government is facing a 300-million-euro (USD$327 million) payment to the International Monetary Fund (IMF) on Friday, June 5. Although the government is believed to have enough cash to pay for its upcoming payment, it could still face a default in July that could force the country to exit the eurozone.

Greek Prime Minister Alexis Tsipras will meet with European Commission President Jean-Claude Juncker in Brussels on Wednesday evening.

“There should be a strong agreement—one that produces growth,” Draghi stated while declining to give details on current negotiations over the country’s bailout package.