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Dublin: The euro zone economy is set to grow moderately and inflation should ease gradually this year but there are risks attached to both scenarios, European Central Bank Governing Council member John Hurley said on Friday.
"Despite continuing problems in financial markets, the latest economic data remain consistent with moderate but ongoing real GDP growth in the euro area," said Hurley.
"While growth is expected to moderate somewhat from its 2007 rate, euro area economic activity is still expected to continue to expand this year," Hurley said. "However, the risks to this outlook would appear to be on the downside," he added.
Hurley said the risks arose from "significant uncertainty" in financial markets and the global economic growth outlook.
"The implications for growth stemming from developments in the US remain highly uncertain," Hurley said.
"The full implications of financial market developments for the US economy, and subsequently for the global economy, may not be fully apparent yet. Hopefully, the initiatives discussed by the G7 will help reduce these uncertainties."
Spillover
Hurley said there were increased signs the deterioration in the US housing market was starting to spill over to the broader economy and that the outlook for consumer spending appeared to have weakened.
"Many observers are of the view that the US economy may experience little or no growth for some time," he added.
On price developments in the euro zone, Hurley said a sharp increase in food and energy prices had had a significant impact on inflation.
"The headline rate is expected to moderate gradually over the course of the year, but the risks to the outlook are clearly on the upside," he said. "The ECB Governing Council has signalled that it will continue to monitor very closely all developments."
Hurley said the likely duration of international market turmoil was now highly uncertain. It had already lasted longer than many commentators would have predicted.
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