Published: Thu, 12 Feb 2009 10:27:35 +0100

ECB Forecasters Revise Down GDP, CPI Estimates

(CEP News) Frankfurt - Echoing European Central Bank President Jean-Claude Trichet's introductory remarks, the ECB noted in its monthly bulletin that inflationary pressures are diminishing and that it sees consumer price growth in line with the goal of price stability over the medium term.

The central bank also reiterated that the euro area is in an extended period of economic decline. Growth risks are clearly on the downside, the report read.

At its meeting on Feb. 5, the ECB Governing Council voted to keep its main refinancing rate unchanged at 2.00%. However, noting the prolonged period of economic slowdown, inflation being in line with the ECB's definition of price stability and the level of uncertainty due to the stronger impact of the financial crisis on the economy, Trichet hinted heavily that the refi rate could be cut at the next meeting in March.

In its monthly bulletin for February, the European Central Bank also released the results of its professional forecasters survey. According to the respondents, inflation will average 0.9% this year, down from initial estimates of +2.2% released in Q4, while price growth will pick up to 1.6% in 2010, down from 2.0% previously estimated.

Regarding GDP growth, the professional forecasters expect the economy to contract 1.7% over 2009, down from a modest growth forecast of 0.3%, and recover slightly to +0.6% next year. The previous forecast has suggested a growth rate of 1.4% for next year.

"Overall, the balance of risks to the forecasts is assessed by respondents to be on the downside," the report read.

Since hitting session lows briefly after the report's release, the euro is currently trading down 0.38% on the day at 1.2857 USD.

Written by CEP News European Staff, eunews@economicnews.ca, edited by Stephen Huebl, shuebl@economicnews.ca