Bundesbank cuts 2016, 2017 GDP and CPI forecasts

In its latest forecasts published this Friday, the German central bank, Bundesbank, lowered growth and inflation outlook for 2016 and 2017.

Key Points:

Cut 2016 GDP forecast to 1.7% vs 1.8% prev in Dec

2017 GDP forecast 1.4% vs 1.7% prev

2018 Growth 1.6% initial forecast

Cut 2016 inflation forecast to 0.2% vs 1.1% prev in Dec

2017 1.5% vs 2.0% prev

20181.7% initial forecast

In its report, the central bank noted, "The German economy's underlying cyclical trend is fairly robust. Its main driver is buoyant domestic demand, which is being bolstered by the favourable situation in the labour market and by rising household income."

“According to the projection, this year's economic growth is being additionally boosted by purchasing power gains resulting from renewed falls in crude oil prices and from an expansionary fiscal policy. Foreign business, by contrast, is receiving only weak stimuli on account of the sluggish growth in world trade.”

"In the coming years, however, it is likely that exports will gain more traction and compensate for domestic demand, growth of which is expected to tail off somewhat."