ECB dramatically slashes its inflation outlook for 2016

The European Central Bank has slashed its eurozone inflation forecast for 2016 to 0.1%, much lower than the 1% it forecast in December. The ECB's staff said Thursday inflation is expected to be weaker than previously expected into 2017, too, as low oil prices and a slowing global economy continue to slow the economic recovery. For 2017, the central bank expects the consumer-price index to grow by 1.3%, lower than the 1.6% predicted three months ago. "Looking ahead, on the basis of current futures prices for energy, inflation rates are expected to remain at negative levels in the coming months and to pick up later in 2016," ECB President Mario Draghi said at a news conference. "Thereafter, supported by our monetary policy measures and the expected economic recovery, inflation rates should recover further." The bank made its first estimate of inflation for 2018, an improvement to 1.6%. In February this year, eurozone inflation dropped to negative 0.2%, largely driven by the impact from tumbling oil prices. The ECB earlier on Thursday cut its deposit rate deeper into negative territory, to minus 0.4%. Negative rates have been criticized for hurting the region's banking sector and slowing its economic recovery, rather than speeding it up.

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