By: Dr. Mike Campbell
The European Central Bank (ECB) has adopted a more bullish stance over its projections for growth within the Eurozone. The ECB has revised its growth forecast for this year and now believes that the region will show an increase of between 1.4 and 1.8%. In 2011, the bank thinks that the region will post growth figures within the range of 0.5 to 2.3% - they’ll probably be right on that call since the range is as broad as a church door.
The ECB has continued to keep interest rates at the 1% mark as widely predicted. The rate has now been on hold for 16 months and is expected to remain at this level until into the New Year. The ECB are also predicting that inflation withi the Eurozone will increase this year to lie within the range 1.5 to 1.7% and is expected to be between 1.2 and 2.2% next year; the increases are linked to the effect of higher commodity prices feeding through to the rest of the economy. However, the upper end of the projected ranges remain close to the Eurozone target figure of 2%, so it is unlikely that the ECB will be forced to change interest rate policy because of inflationary pressure in the coming year.
ECB president, Jean-Claude Trichet explained the upward revision of the growth figures as being due to stronger than predicted global demand which has driven EU exports. However, he pointed to increased concerns about the strength and sustainability of the recovery in the USA and Japan as reasons why the outlook for the Eurozone continued to be uncertain.