Eurozone to contract, warns ECB survey

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The eurozone economy is set to contract this year, a European Central Bank survey released yesterday showed, revising down previous forecasts and strengthening the case for the ECB to take further policy action.

The ECB’s latest Survey of Professional Forecasters (SPF) – a poll of 53 economists, academics and other professional forecasters conducted between April 16 and 19 – pointed to a 0.4 per cent contraction this year.

The latest survey also pointed to inflation of 1.7 per cent this year, down from 1.8 per cent in the prior survey. The ECB targets inflation of close to, but below, 2 per cent.

ECB President Mario Draghi departed from a prepared speech on Monday to reiterate the bank’s readiness to cut interest rates again if the eurozone economy deteriorates further.

The ECB cut its main interest rate to a record low of 0.5 per cent last week. Leading ECB policymakers echoed Mr Draghi’s message on Wednesday, saying the bank still has room to manoeuvre should the eurozone economy continue to worsen.

In its monthly bulletin, which presented the latest SPF survey yesterday, the ECB said it will “monitor very closely” all economic data, using a phrase which in the past has suggested further policy action to come.

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