The ECB has released its monthly report, deciding to keep the key interest rates unchanged. It expects price pressures to remain subdued, but that the risks for price stability outlook are broadly balanced.
Inflation expectations in the medium term, meanwhile, are “firmly anchored in line with the Governing Council’s aim of maintaining inflation rates below, but close to, two per cent".
Its economic analysis shows real GDP declined for the sixth consecutive quarter, with first quarter GDP falling by 0.2 per cent, following a fall of 0.6 per cent in the prior period. The ECB predicts annual real GDP to fall by 0.6 per cent over 2013, but to increase by 1.1 per cent next year as global demand for European exports recovers and significant improvements in financial markets since last summer start to take effect.
The report adds, however:
The Governing Council continues to see downside risks surrounding the economic outlook for the euro area. They include the possibility of weaker than expected domestic and global demand and slow or insufficient implementation of structural reforms in euro area countries.
Meanwhile, the growth of loans to the private sector remain weak, with annual growth rates of households barely unchanged at 0.3 per cent in April and annual growth of loans to non-financial corporations adjusted for loan sales and securitisation falling from -1.3 per cent in March to -1.9 per cent in April.
With regards to structural reforms, the Governing Council will be targeting “competitiveness and adjustment capacities in labour and product markets” in an attempt to counter rising unemployment, particularly among the young.
In Greece meanwhile, the country's bus and rail sytems have come to a standstill as workers strike in protest of the closure of state broadcaster ERT. However, most private sector workers have declined to join the strike.