The hard data available so far for Q3, as well as the more timely activity surveys, suggest that the economy performed fairly well last quarter. GDP growth probably maintained its pace from Q2 and may even have picked up slightly.
But the ECB is likely to be concerned about the outlook for prices. Inflation fell below zero in September for the first time since March. And while that largely reflected the effect of energy prices, the ECB’s favoured measure of long-term inflation expectations fell to a seven-month low. This is another sign that the current rate of economic growth is not enough to generate meaningful upward pressure on inflation, so the ECB is likely to need to do more to get inflation back to its target.
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