MNI BRIEF: EZ Inflation Below Projections -- de Guindos

The European Central Bank has been able to reduce the size of the macroeconomic forecasting errors seen in recent shocks, although what errors are now in the system are likely to the downside as “inflation is now coming in somewhat below, rather than above, the projections,” ECB Vice President Luis de Guindos said in a speech on Wednesday.

These errors reveal “a lack of bias in the projections” and the “large uncertainty” in the baseline, he said.

Highly indebted countries should be attentive to funding costs as “weak growth developments or fiscal slippage could reignite concerns around sovereign debt sustainability," de Guindos said, adding that banks should also be prepared for a possible worsening of economic conditions.