ECB sharply cuts inflation and growth forecasts

[FRANKFURT] The European Central Bank slashed its forecasts on Thursday for growth and inflation over the next two years, saying the outlook had deteriorated since its last staff forecasts were published in September.

It forecast 2014 inflation at 0.5 per cent, rising slightly to 0.7 per cent next year and 1.3 per cent in 2016.

Staff cut their prediction for economic output in the eurozone to 0.8 per cent this year, 1.0 per cent in 2015 and 1.5 per cent in 2016.

In September, ECB staff had predicted that inflation would be 0.6 per cent this year, then rise to 1.1 per cent and 1.4 per cent in 2015 and 2016 respectively.

It had also forecast in September that gross domestic product would grow by 0.9 per cent this year and by 1.6 per cent and 1.9 per cent in 2015 and 2016 respectively.

By lowering its forecasts, which show how the ECB expects the economy to develop, the eurozone central bank will heighten expectations that it will take further steps to bolster the bloc's flagging economy.

ECB President Mario Draghi recently threw the door open for drastic measures to prevent growth and inflation from sliding further and expectations are rising that a move could come as soon as the first three months of next year.

REUTERS