Forecasters have raised their euro-zone growth forecasts for this year and next, but the view of inflation view remains unchanged for 2007 and beyond, according to the European Central Bank its latest quarterly survey published this morning.
Forecasters from a range of banks and non-financial institutions in the European Union were also more optimistic about employment in the years ahead, the survey showed.
Nonetheless, the ECB said in the editorial to its monthly bulletin, also published today, that it would be strongly vigilant towards inflation dangers going forward and raise rates further if growth and inflation progressed as it expects.
The text of this editorial, as usual, closely matched what ECB President Jean-Claude Trichet said in a news conference on November 2nd, when he opted to keep rates steady at 3.25 per cent and trail a rise to 3.5 per cent for December.
The ECB relies on the survey to help broaden its picture of inflationary dangers and the economic outlook. Overall, the survey taken in mid October showed forecasters were more optimistic about growth and employment in the coming years, and did not see a net increase in inflation dangers.
Growth estimates showed the strongest upward revision, with 2.6 per cent growth seen in 2006, up from 2.2 per cent forecast in August, and 2 per cent growth seen next year compared to 1.8 per cent predicted before.
Longer term, however, average growth was seen at 2 per cent a year, slightly slower than the 2.1 per cent rate seen three months earlier.
"According to most forecasters, longer-term growth prospects depend mainly on further structural reforms in the labour market and social security systems," the ECB said.
The 2006 and 2007 forecasts were close to those published by the European Commission on Monday and by ECB staff in August.