ECB survey sees higher inflation in years ahead

FRANKFURT, Jan 26 (Reuters): Euro zone inflation could be faster in the coming years while long-term projections remain steady, the European Central Bank's Survey of Professional Forecasters showed on Friday, underpinning the bank's cautions optimism.

Headline inflation could be 1.5 per cent this year and 1.7 per cent next year, both 0.1 per centage point above projections in October, according to the survey of 56 forecasters, an important input in the ECB's policy deliberations.

The ECB decided on Thursday to keep policy on hold as inflation pressure remains muted but argued that its confidence has strengthened that inflation would rise back to its target of just below 2.0 per cent.

The firming euro could be the biggest obstacle in reaching the objective and ECB President Mario Draghi warned on Thursday that the bank could be forced to rethink its policy strategy if there was unwarranted firming in the exchange rate.

The survey also confirmed Draghi's confidence in growth as the GDP projection for this year was raised to 2.3 per cent from 1.9 per cent three months ago. The 2019 growth outlook was lifted to 1.9 per cent from 1.7 per cent.