Eurozone to focus on inflation as economic outlook set to deteriorate

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A symphony of light illuminates the southern facade of the headquarters of the European Central Bank (ECB) in Frankfurt, Germany, December 30, 2021. REUTERS/Wolfgang Rattay/

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BRUSSELS, July 11 (Reuters) – Euro zone finance ministers are expected to indicate on Monday that tackling inflation is the current priority despite weaker growth in the bloc, officials said, as they will be briefed on deterioration in the economic outlook.

At a regular monthly meeting of ministers, the EU’s executive board is expected to provide an update to its economic forecast, showing slower growth and higher inflation, officials said.

Ministers will focus on tackling inflation, indicating a move further away from the massive economic stimulus offered during the acute phase of the COVID-19 pandemic.

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Fiscal council should recognize that ‘we have moved away from the need to help the economy‘, official says, echoing recommendation for ‘moderately tight fiscal policy’ next year issued by committee in June European Budget (EBF), an Advisory Body.

The EBF, whose recommendation will be discussed by ministers on Monday, called for budgetary prudence, in particular for highly indebted countries, such as Italy, Greece or France.

The discussion on the 2023 fiscal stance comes before governments prepare their national budgets for next year.

The push against inflation, which would support the expected tightening of monetary conditions by the European Central Bank, comes however in a context of an expected further decline in economic growth.

The Commission is expected to revise its forecast for the euro zone downwards when updating its outlook on Thursday, officials said.

In May, it had lowered its growth forecast for the 19 countries sharing the euro to 2.7% this year against 4.0% forecast in February, and to 2.3% next year against 2.7%, in his first assessment of the impact of the war in Ukraine. on the bloc’s economy. Read more

Inflation forecasts are also expected to be revised upwards from the 6.1% forecast by the Commission in May for this year, which was in itself a major improvement from the 3.5% previously estimated.

The International Monetary Fund will also brief eurozone ministers at the meeting on its latest assessment of the bloc’s economy.

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Reporting by Francesco Guarascio; Editing by Bernadette Baum

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