Page last updated at 13:41 GMT, Thursday, 3 September 2009 14:41 UK

Eurozone to 'grow more strongly'

Euro currency logo sign in front of ECB building in Frankfurt
Interest rates are at their lowest in the ECB's 10-year history

The European Central Bank (ECB) has raised its forecast for economic growth in the eurozone and kept interest rates on hold at 1%.

The head of the bank said there was an expectation that "severe contraction" would now be followed by a period of "stabilisation and gradual recovery".

Eurozone rates were cut from 1.25% to a record low of 1% in May this year.

Earlier on Thursday, a survey found that eurozone economic activity rose in August for the first time in 15 months.

'Uncertainty remains'

The ECB said the eurozone economy would contract between -4.4% and -3.8% this year. Its last forecast was for a range between -5.1% and -4.1%.

The bank said economic activity next year would fall between -0.5% and 0.9%. Previously it forecast a range of -1% to 0.4%.

"This implies an upward revision of the ranges for both 2009 and 2010, reflecting mainly the recent, more positive developments and information," the bank's head Jean-Claude Trichet said.

But he added that "uncertainty remains a major, major factor. The range of our forecast shows a large degree of uncertainty."

No change

The Purchasing Managers Index (PMI) survey for August recorded a score of 50.4, where a score above 50 shows an increase in economic activity.

This was the first index measure above 50 since May 2008, and raised hopes that the eurozone could soon emerge from recession.

Since the last decision by the ECB to keep rates unchanged, figures have shown the German and French economies emerging from year-long recessions.

But the outlook for the eurozone economy as a whole remains unclear.

For example, figures also released on Thursday showed that eurozone retail sales fell in August.



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