ECB expects 'relatively vigorous pick-up' in core CPI, Draghi says

Europe's single currency bounded higher in mid-afternoon trading on Monday, after European Central Bank chief, Mario Draghi, said that the stable outlook for headline consumer prices masked stronger underlying price pressures.

"Looking forward, annual rates of HICP inflation are likely to hover around current levels in the coming months and are projected to reach 1.7% in each year between now and 2020," Draghi said in testimony before the European Parliament's Committee on Economic and Monetary Affairs.

"This stable profile conceals a slowing contribution from the non-core components of the general index, and a relatively vigorous pick-up in underlying inflation. Reflecting these dynamics, the ECB projections foresee inflation excluding food and energy reaching 1.8% in 2020."

As of 1628 BST, euro/dollar was trading higher by 0.24% to 1.17773, having early hit an intra-session high of 1.1816.

In his introductory statement, Draghi highlighted how unemployment in the euro area had fallen to its lowest level since November 2018, even as the annual rate of growth in negotiated wages in the Eurozone had accelerated from 1.5% in 2017 to 1.7% in the first quarter of 2018 and to 2.2% in the second quarter.

Indeed, Draghi pointed to signs of labour shortages in some countries and sectors and household disposable incomes growing at their fastest clip in a decade.

The ECB's inflation target was for medium-term price growth below but close to 2.0%.

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