Tags: EU | Europe | Interest | Rates

ECB Raises 2010, 2011 Eurozone Growth Forecast

Thursday, 02 Sep 2010 08:54 AM

The European Central Bank raised its growth forecast for this year and next after a healthy second-quarter performance from the 16 countries that use the euro — but the bank made clear that the outlook remains uncertain and kept up its efforts to offer short-term loans to banks.

The ECB, as expected, left its benchmark refinancing rate at a record-low 1 percent for the 16th consecutive month.

Bank President Jean-Claude Trichet said Thursday that recent economic data from the eurozone had been stronger than expected.

"Looking ahead, the recovery should proceed at a moderate pace with uncertainty still prevailing," he said at a news conference.

Trichet said the ECB is now projecting growth this year of 1.4 to 1.8 percent percent — a range that centers on 1,6 percent, up from the 1 percent forecast in June.

Its forecast for 2011 was for growth between 0.5 and 2.3 percent. That range centers on 1.4 percent, up from the previous 1.2 percent.

Trichet said the bank would stage three-month, fixed-rate tender operations in October, November and December — reflecting the ECB's desire to keep money flowing to the banking system in the aftermath of the government debt crisis.

He didn't offer any hint as to when the ECB might end the program to buy up government bonds that it launched at the height of that crisis earlier this year. There has been little activity in that program for some time.

Trichet said economic indicators for the third quarter are mostly better than expected although they confirm expectations of "a moderation in the second half."

He reiterated his statement of last month that "we do not declare victory" — although he added: "I already said that the double dip (recession) was not in the cards in our own analysis."

There have been mounting concerns recently about the pace of the U.S. recovery. Japan's economic outlook has darkened as the yen's rise pressures its exporters at a time when its economy is barely growing, and there also have been signs of cooling growth in China.

Europe's economic rebound has largely been fed by a recovery in global demand. Eurozone exports grew by 4.4 percent in the second quarter.

Strong growth in traditionally export-led Germany helped the 16-nation eurozone's economy to grow 1 percent in the second quarter over the previous three months.

U.S. Federal Reserve chairman Ben Bernanke recently conceded that the Fed may have to back another round of monetary easing if the U.S. economy continues to weaken.

Earlier Thursday, Sweden's central bank has raised its key interest rate by a quarter of a percentage point to 0.75 percent, citing the pickup in exports and an improved labor market. Sweden is a European Union member but doesn't use the euro.

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The European Central Bank raised its growth forecast for this year and next after a healthy second-quarter performance from the 16 countries that use the euro but the bank made clear that the outlook remains uncertain and kept up its efforts to offer short-term loans to...
EU,Europe,Interest,Rates
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2010-54-02
Thursday, 02 Sep 2010 08:54 AM
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