“The European Central Bank Thursday slashed its euro-zone growth forecasts for this year and next, saying uncertainty and downside risks remain in the single-currency area,” says a report in today’s Wall Street Journal Online.

“The ECB now forecasts 2003 gross-domestic-product growth between 0.4% and 1%, well below the 1.1% to 2.1% growth it had previously expected. The 2004 forecast was cut to a range between 1.1% and 2.1% from between 1.9% and 2.9%.”

“Growth hasn’t taken off after the Iraq war and remains subdued. It is expected to pick up gradually, the bank said.”

“The euro-zone economy registered zero growth in the first three months of this year, with the economy shrinking in three countries — Germany, Italy and the Netherlands.”

“The central bank also adjusted its inflation forecasts for 2003 and 2004. It sees inflation this year coming in between 1.8% and 2.2%. It had earlier expected it to be somewhere between 1.3% and 2.3%. For 2004, it expects inflation to be between 0.7% and 1.9%, compared with earlier forecasts of 1% to 2.2%.”

“Despite concerns expressed by economists around the region, the ECB said none of its current forecasts points to any deflationary risks for the euro zone.”

“Last week, the ECB cut its main refinancing rate by a half percentage point to 2%. ECB President Wim Duisenberg said that was a level lower than any euro-zone country has seen since World War II.”

“Mr. Duisenberg gave few clues about future actions in a speech Thursday to a European parliamentary committee.”

“He kept to previous forecasts of a gradual recovery at the end of this year, picking up speed next year. Inflation represents little risk, he said. A strong euro helps. And he repeated calls on European finance ministers to control fiscal deficits and put through structural labor and pension reforms.”