Saturday, August 11, 2012

ECB, Eurozone economic outlook 2013

World Economic outlook - ECB, Eurozone economic outlook 2013 : The European Central Bank (ECB) gave a gloomy outlook for the Eurozone economy on Thursday in its monthly report, dampening sentiment on equity markets as it downgraded its growth prospects for this year and the next.

The Governing Council also said that it may undertake "outright open market operations", suggesting that the Bank would follow through on last week's hint by President Mario Draghi at further bond-buying.

The ECB now expects the region to contract by 0.3% this year, slightly worse than the 0.2% fall originally estimated, while 2013 growth will be 0.6%, under the previous forecast of 1%.

"Looking beyond the short term, the Governing Council expects the euro area economy to recover only very gradually, with growth momentum being further dampened by a number of factors," the ECB said.

"In particular, tensions in some euro area sovereign debt markets and their impact on financing conditions, the process of balance sheet adjustment in the financial and non-financial sectors and high unemployment are expected to weigh on the underlying growth momentum, which is also affected by the ongoing global slowdown."

Eurozone consumer price inflation was 2.4% in July, unchanged on the preiouvs month, but the Bank said that inflation would remain close to but below the target of 2% in the medium term.

"Over the policy-relevant horizon, in an environment of modest growth in the euro area and well-anchored long-term inflation expectations, underlying price pressures should remain moderate," the ECB said.

Analyst Craig Erlam from Alpari said: "This has only fuelled expectations that we’ll see an extension of QE over the coming months, with the inflationary concerns linked to it no longer a concern."

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