ECB hikes eurozone growth, inflation estimates

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The European Central Bank on Thursday hiked its eurozone growth forecast for 2011 to 1.9 percent from 1.7 percent, but with inflation also up -- to 2.6 percent from an earlier estimate of 2.3 percent.

For next year the ECB, which decided earlier to keep interest rates unchanged, predicted both inflation and the growth rate for the eurozone would drop to 1.7 percent.

ECB president Jean-Claude Trichet vowed the central bank "will do all that is needed to prevent recent price developments giving rise to broad-based inflationary pressures," pointing to a possible interest rate rise next month to help keep inflation below 2.0 percent, the ECB target.

He added that the most recent data "confirm the positive underlying momentum of economic activity in the euro area (although) ... uncertainty remains elevated."

The ECB's governing council assessed that the risks to this economic outlook remain broadly balanced.

On the one hand, it sees favourable business confidence and higher foreign demand contributing to growth but on the downside, there are "the ongoing tensions in some segments of the financial markets that may potentially spill over to the euro area real economy."

There are also the problems of energy prices, protectionist pressures and "the possibility of a disorderly correction of global imbalances," said Trichet.

© 2011 AFP

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