The euro zone economy will probably contract more than previously expected this year, according to new European Central Bank staff forecasts which also raised the bank's outlook for inflation for 2012/2013.
The ECB said it expected a very gradual economic recovery and revised down its forecasts for gross domestic product (GDP) for this year to a fall of between 0.6% and 0.2%.
ECB President Mario Draghi said the forecasts also showed a range of between -0.4% to growth of 1.4%.
The bank's previous forecasts three months ago had been between -0.5 to 0.3% for 2012 and 0.0% to 2.0% for 2013.
"We expect the euro area economy to recover only very gradually," Draghi said.
The September macroeconomic projections, however, also raised forecasts for inflation this year to between 2.4 and 2.6% from a previous forecast of 2.3-2.5%. Prices are seen rising 1.3 to 2.5% in 2013, compared with 1.0-2.2 range in the June forecasts.
Draghi said the 17-nation bloc's economy was subject to downside risks stemming especially from the euro zone debt crisis and the tensions that has caused in a number of countries.
Earlier, the ECB kept its main interest rate at a record low level of 0.75%.
