ECB Says Economy to Remain Weak Into 2013, Risks on Downside

The European Central Bank said the euro area’s economic slump will extend into next year and inflation will drop below its 2 percent limit.

“Later in 2013 economic activity should gradually recover, as global demand strengthens and our accommodative monetary policy stance and significantly improved financial market confidence work their way through to the economy,” the Frankfurt-based ECB said in its monthly bulletin today, echoing President Mario Draghi’s Dec. 6 policy statement. Still, “the Governing Council continues to see downside risks to the economic outlook for the euro area,” it said.

The ECB last week forecast that the 17-nation euro-area economy will shrink 0.5 percent this year and 0.3 percent in 2013. It left the benchmark interest rate unchanged at a record low of 0.75 percent.

Inflation is “expected to fall below 2 percent in 2013,” the ECB reiterated in today’s bulletin. “Over the policy- relevant horizon, inflation rates should remain in line with price stability.”

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