PARIS (MNI) – The European Central Bank staff has cut its forecasts
for economic growth in the Eurozone because of the debt crisis, and it
expects the inflation rate to fall below 2% next year, ECB President
Mario Draghi said Thursday.

The revisions suggest that ECB rates could be cut further, after
today’s 25-basis point reduction in the refinancing rate to 1.0%.

Draghi told journalists at his monthly press conference that the
central bank’s staff forecasters now expect the Eurozone economy to grow
by between 1.5% and 1.7% this year, for a midpoint of 1.6%, and by -0.4
to 1.0% in 2012, which gives a feeble midpoint of +0.3%.

The 2011 forecast is virtually unchanged from the one issued in
September, which also produced a midpoint of 1.6%. But the new forecast
for 2012 is sharply below the 1.3% midpoint forecast for 2012 in the
previous projections. The ECB staff forecast also projected economic
growth in the Eurozone of between 0.3% and 2.3% in 2013, Draghi said.

The ECB staff put HICP inflation in a range of 2.6% to 2.8% this
year, for a midpoint of 2.7%, up slightly from 2.6% in the September
forecasts. For 2012, the ECB staff sees HICP between +1.5% and +2.5%,
giving a midpoint of 2.0% — up from 1.7% in the last forecasts and,
significantly, slightly above the ECB’s definition of price stability.
Inflation in 2013 is expected to rise by to 0.8% to 2.2%, Draghi said.

“Increasing financial market tensions are continuing to dampen
economic activity in the euro area,” Draghi said in his opening
statement. Draghi said inflation was likely to remain above 2% in the
months ahead, before dropping below 2% by the end of 2012, as economic
growth in the Eurozone weakens.

The following table contains the ECB’s new forecasts, compared with
the ones they issued in September.

New Projections September Projections
Range Midpoint Range Midpoint
2011 GDP +1.5% to +1.7% +1.6% +1.4% to +1.8% +1.6%
2012 GDP -0.4% to +1.0% +0.3% +0.4% to +2.2% +1.3%
2013 GDP +0.3% to +2.3%
2011 HICP +2.6% to +2.8% +2.7% +2.5% to +2.7% +2.6%
2012 HICP +1.5% to +2.5% +2.0% +1.2% to +2.2% +1.7%
2013 HICP +0.8% to +2.2% +1.5%

–Paris newsroom, +331-42-71-55-40; paris@marketnews.com

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