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EC says eurozone economic growth will be more subdued than previously forecast

EC says eurozone economic growth will be more subdued than previously forecast
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The European Commission has had to cut it growth forecast for the eurozone economy again.

Brussels says because of weaker private demand and investment the currency bloc’s economy will expand slightly more slowly next year than previously projected.

The experts now think the economy of the 18 countries that will share the euro from next year will expand 1.1 percent. In May, the Commission forecast growth of 1.2 percent.

In 2015, growth of 1.7 percent is forecast.

This year is likely to end with 0.4 percent contraction.

The Commissioner for Economic and Monetary Affairs Olli Rehn told reporters: “In Europe overall, growth turned positive in the second quarter of this year, however the ongoing necessary process of adjustment and deleveraging will still continue to weigh on growth for some time.”

Nevertheless, he said the pace of recovery should slowly accelerate quarter-on-quarter: “There are increasing signs that the European economy has reached a turning point. “The fiscal consolidation and structural reforms undertaken in Europe have created the basis for recovery.”

Austerity and record unemployment mean Europeans have been buying less which has led to low consumer price inflation.

The Commission said it will be 1.5 percent this year and next and 1.4 percent in 2015, which makes an interest rate cut for the eurozone more likely.

The ECB wants to keep the rate below, but close to 2 percent over a two year horizon.

Euro money market traders polled by Reuters said the ECB might want to wait for more data before deciding to cut rates to a new record low and did not expect a change to the main refinancing rate this week. ECB policymakers meet on Thursday.