Wall Street Journal
March 8, 2012
The European Central Bank Thursday admitted that the euro-zone's economy is likely to contract this year, and that inflation will outstrip the bank's medium target.
Opening his monthly press conference, Mario Draghi said that higher-than-expected energy prices, along with increases in various state-administered prices, meant that "inflation is expected to remain above 2% in 2012, with upside risks prevailing."
The central inflation forecast for 2012 is now 2.4%, up from 2% three months ago, Mr. Draghi said.
At the same time, the central assumption of the Eurosystem's forecasters is now that the economy will shrink by 0.1% this year, that being the mid-point in a range between -0.5% and 0.3%. For 2013, the ECB now expects growth of 1.1%, compared with a prior forecast of 1.3%.