ECB cuts growth forecasts, maintains inflation forecasts
The European Central Bank on Thursday cut its forecasts for eurozone growth this year and next year, but held its outlook steady for inflation in the 17 euro countries.
ECB President Jean-Claude Trichet said the bank was pencilling in gross domestic product growth (GDP) of 1.6 percent in 2011 and to 1.3 percent in 2012, compared with 1.7 percent and 1.9 percent respectively previously.
Inflation in the single currency area was projected to average 2.6 percent in 2011 and 1.7 percent in 2012, unchanged from previous estimates.
"Looking ahead, a number of developments seem to be dampening the underlying momentum in the euro area," Trichet said.
These included "a moderation in the pace of global growth, related declines in equity prices and in business confidence, and unfavourable effects resulting from ongoing tensions in a number of euro area sovereign debt markets," Trichet told a news conference after the bank held its interest rates steady at 1.5 percent.
"As a consequence, real GDP growth is expected to increase very moderately in the second half of this year," Trichet said.
On the inflation front, the ECB chief said inflation rates "are likely to stay clearly above 2 percent over the coming months ... (but) should fall below 2 percent in 2012."
The ECB viewed the risks to the medium-term outlook for price developments as being "broadly balanced" between rising oil and commodity prices on the one hand and slower eurozone and global growth on the other, Trichet said.
© 2011 AFP