Rating agency S&P chops euro zone forecasts

LONDON, March 30 Rating agency Standard and
Poor’s cut its forecasts for euro zone economic growth and
inflation on Wednesday, blaming the “nosedive” in financial
conditions since the start of the year.

S&P said it now expected to 19-country bloc to grow at 1.5
percent this year versus 1.8 percent it had forecast back in
November.

It made more substantial revisions to its inflation
projections, saying in now saw it coming in at just 0.4 percent
this year, almost a third of the 1.1 percent it had previously
flagged. Next year it expects it to rise to 1.4 percent but that
too was trimmed down from 1.5 percent.

“A nosedive in financial conditions at the start of the year
has taken some wind out of the euro zone economy,” S&P’s chief
European economist Jean-Michel Six said.

“In addition, we stress that central bank actions are having
a diminishing impact on inflation and growth prospects,” he
added, citing both the fall in commodity prices at the start of
and a lack of support from governments in terms of reforms.

The economic forecasts do not have a direct impact on S&P’s
sovereign ratings, although the shift in the fundamentals feed
into underlying analysis.

The latest report also added that this month’s signal from
the European Central Bank that was shifting from interest rate
cuts to newer forms of asset purchases meant the euro’s
long-running fall against the dollar may be ending.

(Reporting by Marc Jones; Editing by Alison Williams)

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Source URL:http://www.reuters.com/article/eurozone-growth-sp-idUSL5N1721HD

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