Professional forecasters slashed the inflation and growth projections for Eurozone for this year as well as for the next two years, signaling that the European Central Bank may plunge into more stimulus action in the coming months.
Results of the latest Survey of Professional Forecasters for the fourth quarter, published in the ECB's monthly bulletin released Thursday, showed that the inflation outlook for next year was slashed to 1 percent from 1.2 percent seen earlier.
The projection for this year was lowered to 0.5 percent from 0.7 percent and the outlook for 2016 was cut to 1.4 percent from 1.5 percent.
"These downward revisions were broad-based, with around 85 percent of respondents revising down their forecasts for 2014 and 2015, and 60 percent doing so for 2016," the ECB said.
"The main factors cited as being behind these downward revisions were lower oil prices and weaker than expected economic activity. On the other hand, the depreciation of the euro was cited as a counterbalancing factor in these revisions."
The average inflation projection for the longer-term expectations, which is until 2019, was also reduced to 1.80 percent from 1.86 percent.
Surveyed experts also reduced the growth forecast for next year to 1.2 percent from 1.5 percent. The outlook for this year was cut to 0.8 percent from 1 percent. The projection for 2016 was downgraded to 1.5 percent from 1.7 percent.
Nearly 90 percent of the respondents cut their growth forecasts for this year and next, while two-thirds lowered their projection for 2016.
"The downward revisions for 2014 were driven by disappointing figures for GDP growth in the second quarter, as well as persisting low business confidence in some euro area countries, and a more pessimistic outlook for key export markets," the report said.
Respondents regarded the recent fall in euro area economic activity as a temporary phenomenon, the survey said. However, their forecasts were partly based on recent geopolitical tensions translating into lower confidence and a wait-and-see attitude on the part of investors for the short-term horizon, it added.
Eurozone inflation rose slightly in October, but remained consistently below 1 percent, signifying the risk of deflation in the currency bloc. Meanwhile, core inflation that excludes energy, food, alcohol and tobacco, slowed to 0.7 percent from 0.8 percent a month ago.
Though policymakers maintain that deflation in the euro area is highly unlikely, the threat cannot be ruled out, according to the recent rhetoric.
Yesterday, ECB President Mario Draghi reiterated the Governing Council's commitment to take further unconventional measures should inflation expectations worsen or the existing measures prove to be insufficient.
Earlier this month, the European Commission lowered its 2015 growth forecast for the Eurozone to 1.1 percent from the 1.7 percent predicted in May. The inflation projection for 2015 was also reduced to 0.8 percent from 1.2 percent. The growth and inflation forecasts for this year were also cut.
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