ECB cuts growth forecast amid inflation concerns

ECB cuts growth forecast amid inflation concerns
The European Central Bank on Thursday cut its growth forecasts for 2008 and 2009 for the 15-nation eurozone, but raised its inflation projections.

Announcing the changes after leaving its main interest rate unchanged, it said it now expected economic growth this year of 1.7 percent, down from its earlier forecast of 2.0 percent. For 2009 it cut its growth prediction to 1.8 percent from 2.1 percent. But it raised its 2008 forecast for inflation to 2.9 from 2.5 percent.

ECB president Jean-Claude Trichet said inflation in 2009 should ease back to 2.1 percent, up from the previous estimate of 1.8 percent – but still above the central bank’s target of close to but below 2.0 percent.

“The latest information has confirmed the existence of strong short-term upward pressure on inflation,” Trichet told a news conference in Frankfurt on Thursday. “It has also confirmed the assessment that there are upside risks to price stability over the medium term, in a context of very vigorous money and credit growth.”

Germany accounts for roughly a third of the entire eurozone economy.