(CEP News) Frankfurt - Euro zone inflation is expected to remain "well below 2%" this year and the next, while both global and domestic demand will continue to deteriorate in 2009 before gradually recovering, the European Central Bank said in its monthly bulletin, echoing ECB President Jean-Claude Trichet's introductory remarks.At its March 5 policy meeting, the ECB Governing Council voted to cut its main refinancing rate 50 basis points to a record low 1.5%. The central bank also released its updated staff projections for both inflation and growth.
According to the projections, price growth is expected at between 0.1% and 0.7% for 2009 before picking up to between 0.6% and 1.4% in the following year.
"Owing mainly to base effects stemming from the past behaviour of energy prices, headline annual inflation rates are projected to decline further in the coming months, possibly temporarily reaching negative levels around mid-year," the bulletin read.
Regarding economic growth, the projections suggested an overall range from -3.2% and -2.2% this year. By 2010, the central bank expects a gradual recovery and look for a growth rate of between -0.7% and +0.7% for the year.
"In both 2009 and 2010, the annual GDP growth rate will be significantly reduced by negative carry-over effects from the previous year," the bulletin added.
However, the report also said that the economy "continues to be surrounded by uncertainty."
Written by CEP News European Staff, eunews@economicnews.ca
According to the projections, price growth is expected at between 0.1% and 0.7% for 2009 before picking up to between 0.6% and 1.4% in the following year.
"Owing mainly to base effects stemming from the past behaviour of energy prices, headline annual inflation rates are projected to decline further in the coming months, possibly temporarily reaching negative levels around mid-year," the bulletin read.
Regarding economic growth, the projections suggested an overall range from -3.2% and -2.2% this year. By 2010, the central bank expects a gradual recovery and look for a growth rate of between -0.7% and +0.7% for the year.
"In both 2009 and 2010, the annual GDP growth rate will be significantly reduced by negative carry-over effects from the previous year," the bulletin added.
However, the report also said that the economy "continues to be surrounded by uncertainty."
Written by CEP News European Staff, eunews@economicnews.ca
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