EU interim forecasts: growth moderates while inflation temporarily surges

21 February 2008

Economic growth is expected to slow to 2.0% this year in the European Union. The global economic situation and outlook remain unusually uncertain at the start of 2008. The re-pricing of risk, which began in the summer of last year in the financial markets, is not over yet. As a result, conditions in the international financial system are fragile, as the functioning of several segments of the credit markets has been impaired. Spreads remain wide and the appetite for risk reduced.

 

The risks to the growth outlook stay on the downside. The US downturn is more marked and the impact of the fiscal and monetary easing remains uncertain. The distress in the financial markets is still ongoing. Lastly, high commodity prices are taking their toll on both European growth and inflation. The risks to the inflation outlook now appear more balanced, but are still on the upside, with the increase in inflation expectations being a particular source of concern.

 

Press release

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