European Central Bank Sees Slow Growth and Steady Inflation
A commentary on recent events by National Gold Group’s Michael Carr – December 7, 2012
In its latest forecast, the European Central Bank (ECB) lowered its expectations for economic growth and inflation. BusinessWeek noted that the ECB warned of a gloomy year for the European Union as they lowered their growth forecast for 2013 from 0.5 percent to minus 0.3 percent. The central bank expects a rather robust recovery in 2014 to push growth to 1.2 percent.
On inflation, the ECB expressed what seems like optimism that the trend for prices is down. They expect inflation to come in at 2.5 percent this year and drop to about 1.6 percent next year. For 2014, inflation is expected to continue dropping to 1.4 percent.
The ECB, like the Federal Reserve, is taking steps to boost economic growth by increasing the money supply. Their growth forecast indicates that they are not optimistic about attaining that goal with the economy expected to contract next year and remain slow in the next year.
Looking solely at the growth estimates, the inflation estimates could make sense. With slow growth, low inflation would be expected. This, however, ignores the potential impact of the monetary easing being pursued around the world.
With the money supply increasing, prices should rise unless the pace of economic growth picks up. None of the experts assessing the global economy expect growth so inflation appears to be inevitable.
Gold may be the only way investors can protect their wealth in this type of economic environment. Gold prices are in an uptrend and as inflation remains above the pace of economic growth, gold should continue to post gains.
The above commentary is for informational purposes only and is not a solicitation by National Gold Group or Michael Carr. It is the commentator’s opinion only and not intended for investment recommendations, and does not necessarily reflect the views of National Gold Group. Any references to outside sources are believed accurate. Past performance is not a guarantee of future results. All commodities involve risk. Investors should consult their financial advisor before making any investment decisions.