FXstreet.com (Barcelona) - The European Central Bank has reaffirmed its confidence in the Euro Zone's economic fundaments and their ability to minimize the possible consequences from the unusually high uncertainty in the prospects for economic growth, latest monthly bulletin shows.
The slowdown in the Euro Area's major partner's economies is likely to have an impact on euro area real GDP growth in 2008 according to the Bank's bulletin, but domestic and foreign demand are expected to sustain ongoing growth in the current year.
Euro Zone's economy remains sound and does not show major imbalances, the Bank points out that companies' profitability has been sustainable and the unemployment rate is moving about the lowest levels of the latest 25 years, reasons why, according to the Bank, consumption growth should continue to contribute to economic expansion, in line with real disposable income, and investment growth should provide ongoing support.
Nevertheless, the Bank warns about high levels of uncertainty surrounding the outlook for economic activity, uncertainty, that mainly relates with a potentially broader than currently expected impact of financial market developments on financing conditions and economic sentiment, with negative effects on world and euro area growth.
Consumer prices are growing at levels around 3.2% year on year pace, which confirms the strong upward pressure over inflation in the short term stemming from higher prices on commodities, the Bank affirms that will be the most likely scenario for the next months, and prices will moderate later in 2008. The bank reaffirms its concern to anchor inflation in line with price stability, as the Bank's highest priority.