The European Central Bank (ECB) upped its growth forecast for 2014 on Thursday, sending the euro higher, but downgraded its outlook for inflation.
Speaking at his monthly press conference, ECB President Mario Draghi predicted the euro zone economy would grow by 1.2 percent this year. This was better than the 1.1 percent growth forecast issued by the central bank at the end of last year.
“The ongoing recovery is expected to proceed, albeit it at a slow pace,” Draghi told journalists in Frankfurt, Germany. He reiterated that risks to the euro area remained “to the downside.”
Growth in 2015 and 2016 is seen at 1.5 percent and 1.8 percent respectively.
Draghi downgraded the ECB’s inflation outlook for 2014 to 1.0 percent, from the 1.1 percent forecast at the end of last year — well below the central bank’s targeted level of “close to” 2 percent.
He reiterated that the euro zone was facing a “prolonged period of low inflation”, but declined comparisons with Japan, which suffered deflation during the 1990s.
“We believe the situation is different,” Draghi told reporters, saying that the ECB differed from the Bank of Japan in that it had taken “early decisive action” to tackle economic stagnation.
He added that consumer demand in the euro zone was boosted by low energy prices, and that bank and company balance sheets were better in the area than they were in Japan during its “lost decade”.
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