The Euro-Zone CPI estimate declined at an annual rate of 0.2% in August after falling at a record-paced during the previous month, and the less-than-expected drop encourages an improved outlook for price growth as policy makers take unprecedented steps to stimulate the ailing economy. As the outlook for growth and inflation improves, a Bloomberg News survey shows all of the 58 economists polled forecast the European Central Bank to hold the benchmark interest at 1.00%, and is likely to uphold its EUR 60B in covered bond purchases as the central bank maintains its one and only mandate to ensure price stability. As price pressures fall at a slower pace, investors anticipate the ECB to tighten policy over the next 12 months, and long-term expectations for higher interest rates may continue to push the exchange rate higher as the economic outlook improves.
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