ECB survey sees lower eurozone inflation, higher growth

FRANKFURT - Eurozone inflation will remain below target in the next years, while growth will gather momentum, according to a new survey published by the European Central Bank on Thursday.

In its regular quarterly survey of professional forecasters, the ECB found that inflation in the 17 countries that share the euro was expected to reach an annual average 1.4 per cent this year.

It would edge up only incrementally to 1.5 per cent in 2014 and 1.6 per cent in 2015, the ECB said.

At the time of its last SPF survey om July, forecasters had been pencilling in inflation of 1.5 per cent for both this year and next year and a rate of 1.8 per cent in 2015.

The ECB defines price stability as inflation rates close to but just below 2.0 per cent.

The respondents in the survey attributed the subdued inflation outlook to multiple factors including only modest economic recovery, low wage increases, high unemployment levels, more favourable trends in commodity prices, and the rise in the euro, the ECB explained.

Over the longer term, the rate of inflation could reach 1.9 per cent, the survey found.

Last week, the ECB shaved a quarter of a percentage point off its key "refi" refinancing rate to a new all-time low of 0.25 per cent in face of extremely low inflation of just 0.7 per cent in October.

ECB chief Mario Draghi insisted, however, that there was no threat of deflation - a vicious circle of falling prices - in the euro area.

Turning to the growth outlook, the SPF survey predicted that area-wide gross domestic product (GDP) would contract by 0.4 per cent this year, but return to growth of 1.0 per cent in 2014 and 1.5 per cent in 2015.

That represents an upward revision from the previous forecasts.

"Respondents cite the carry-over effects from the surprise pick-up in GDP growth in the second quarter of 2013 as the main factor behind the upward revisions for 2013," the ECB wrote.

Nevertheless, levels of economic sentiment indicators in the third quarter suggested that that euro area GDP growth "will remain moderate," the ECB said.

"Most respondents indicate that fragmentation in business financing conditions is still a major factor preventing growth from picking up at a stronger pace."

The survey was conducted between October 16-22 and 54 responses were received, the ECB said.