The European Central Bank has decided to keep interest rates unchanged and reiterated its commitment to keeping monetary policy accommodative for as long as necessary and interest rates to remain at present or lower levels for an “extended period of time” (report).
The bank said downgraded the Eurozone’s 2013 GDP forecast by 0.2 percentage points to -0.6 per cent. The 2014 forecast was also revised down to 0.9 per cent from 1.0 per cent.
It also revised down annual inflation expectations to 1.5 per cent in both 2013 and 2014 (from 1.6 per cent and 1.7 per cent respectively). The bank expects inflation to remain below, but close to, two per cent over the medium term.
Risks surrounding the economic outlook for the euro area continue to be on the downside, the ECB said, with recent developments in global money and financial market conditions and related uncertainties potentially weakening economic conditions. The bank also points to the possibility of weaker than expected domestic and global demand or insufficient implementation of structural reforms in euro area countries.