European Central Bank President Jean-Claude Trichet said price pressures have diminished and the inflation rate is likely to meet the ECB’s goal of about 2 per cent in the medium term.
“The economic outlook in the euro area has continued to weaken and inflation has declined further,” Mr Trichet said at a hearing in the European Parliament in Brussels today.
“We expect euro-area inflation to remain in line with our definition of price stability over the policy-relevant horizon.”
The European Commission this week forecast the euro-area economy will shrink 1.9 per cent this year. The inflation rate dropped to 1.6 per cent in December, the lowest in more than two years.
The ECB on January 15th cut the benchmark rate by half a percentage point to 2 per cent, matching a record low.
While “risks to economic growth remain on the downside,” Mr Trichet said slower inflation and looser fiscal and monetary policies should help the economy to stage a recovery in 2010.
“The euro area should benefit from broad and far-reaching policy measures reached over the past weeks,” he said.
Bloomberg