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European Union

ECB survey predicts subdued inflation, rebounding eurozone growth for 2014

A quarterly survey of economic analysts compiled by the European Central Bank (ECB) foresees inflation in the eurozone staying below optimum. This, however, should not restrain a rebound in growth, the experts say.

According to professional economic forecasters, inflation in the 18-nation eurozone would remain below the desired target of 2 percent within the next three years, the European Central Bank (ECB) said Thursday.

In its regular quarterly survey of forecasting insitutions, the ECB found that prices were presumed to go up by 1.1 percent in 2014, picking up by a stronger 1.4 percent and 1.7 percent in the two years ahead. The 53 insitutions from across the eurozone polled by the ECB said the subdued outlook on inflation was the result of surprises in recent economic data.

“Respondents cited lower commodity prices, the appreciation of the euro, as well as weakness in the economic situation and labor markets as factors behind their revisions,” the ECB survey noted.

In its previous SPF survey released in November, forecasters predicted a rate of inflation of 1.5 percent for this year and 1.6 percent for 2015. Yet, all estimates are below the ECB's desired inflation target of 2 percent - a rate which it considers as price stability.

Deflation worms its way into Greece

The lower-than-predicted inflation would, however, not affect an anticipated rebound in eurozone gross domestic product (GDP), the survey concluded. The experts forecast a return to growth of 1 percent this year and 1.5 percent next year, after shrinking eurozone output in 2013, it added.

That confirmed previous forecasts and implied an expectation of a continuous but gradual strengthening in economic activity over the years ahead, the ECB commented.

Falling prices and weak growth are key worries for the European Central Bank. Therefore, the ECB cut its main interest rate to a historic low of 0.25 percent as eurozone inflation in November dropped below 1 percent. Falling prices, also known as deflation, could set off a downward spiral of lower consumer spending, less investment, fewer jobs and slumping growth.

At a meeting last week, ECB President Mario Draghi insisted, however, that there was no threat of deflation in the single currency area.

uhe/ipj (AFP, dpa)

DW.DE

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