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ECB worried as inflation is tipped to fall

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The ECB has been urged to pursue a policy of aggressive stimulus

The ECB has been urged to pursue a policy of aggressive stimulus

The ECB has been urged to pursue a policy of aggressive stimulus

Professional forecasters have cut their outlook for Eurozone inflation and growth, underlining a trend that could prompt the European Central Bank to take more action to kick-start the flagging economy.

The 61 economists, academics and others surveyed by the ECB expect Euro zone inflation of 1pc next year and 1.4pc in 2016 - down from earlier forecasts of 1.2pc and 1.5pc respectively.

Citing falling oil prices and widespread political tensions in Ukraine and the Middle East, they also predicted growth in economic output would slow to 1.2pc next year, having previously forecast 1.5pc.

Speaking to an audience of Wall Street bankers and economists in New York, Benoit Coeure, a member of the ECB's Executive Board, conceded that low inflation was a worry.

"What we see is a subdued outlook for inflation and a weakening of the growth momentum and a continuously sluggish momentum in credit dynamics, which all confirm the need for a very accommodative monetary stance for an extended period of time."

Addressing the problem, is, however, complex. Some doubt, for example, that buying state bonds would help much.

"We cannot just buy any kind of asset expecting that there will be spillovers to other market segments, because it doesn't work, or it works only to a limited extent," said Coeure.

The experts' view is closely watched by markets as a gauge of how the ECB sees inflation, its policy anchor. Some investors read the report as a signal that the ECB could extend debt buying to state bonds, a step Germany has resisted. The ECB will update its own forecasts next month. Annual Eurozone inflation was 0.4 pc in October.

Irish Independent