FXstreet.com (Barcelona) - Risks to price stability have increased further on higher food and energy prices, and the HICP inflation is expected to remain in high levels for a more protracted period than the originally estimated, as stated by the ECB's monthly bulletin.
Upside risks to price stability, according to the bulletin, are confirmed by the continuing money and credit growth and the and the absence of significant constraints on bank loan supply up to now, nevertheless, the bank's government Council, assures that the Euro Zone's economy is supported bu sound fundamentals.
Furthermore, the Bank reaffirms its commitment to use monetary policy to maintain price stability over the medium term wherefore the bank is monitoring closely all developments to act in a firm and timely manner in order to prevent second round effects and ensure that risks to price stability do not materialize over the medium term.
Euro Zone GDP, which grew 0.8% over the first quarter, has run above expectations in the first quarter, according to the Bank, a growing rate that is likely to slow down in the second quarter. Domestic and foreign demand will continue supporting the GDP but at a lesser extent than during 2007, negative effects of the economic slowdown in developed countries will be partially offset by continued growth in emerging markets.
The Bank's GDP prospects advance an economic growth between 1.5% and 2.1% in 2008 and between 1.0% and 2.0% in 2009, which means an upward revision of the 2008 growing expectations, and a downward one for the GDP growth in 2009.