RTTNews - Economic recovery in the 16-nation currency bloc is expected to be uneven, given the temporary nature of some of the supporting factors, European Central Bank President Jean-Claude Trichet said Thursday.

In his introductory statement after the ECB left its key interest rate unchanged at a record low of 1% for the fourth month, Trichet said, The significant contraction in economic activity has come to an end and is now followed by a period of stabilization and very gradual recovery.

Trichet, who wants to nurture Eurozone recovery, suggested that it has no plans to raise the rate it charges banks at its unlimited auctions of 12-month funds. But, he said there would be a gradual withdrawal of emergency measures.

The ECB today raised its economic forecast for this year and next. It now sees 0.2% growth in 2010, a notable revision from a 0.3% contraction predicted in June. This year, the economy is predicted to shrink 4.1%, slower than an earlier prediction of 4.6%.

Also on Thursday, the Organization for Economic Co-operation and Development revised its growth outlook for Eurozone to show a fall of 3.9% in GDP versus previous estimate of a 4.8% decline.

The ECB also raised its inflation forecasts. The central bank now expects consumer prices to rise 0.4% in 2009 and 1.2% in 2010. That compares with a June prediction of 0.3% for 2009 and 1% for 2010. The ECB targets to keep inflation below, but close to 2% over the medium term.

The risks to this outlook remain broadly balanced, Trichet said.

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