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ECB sees inflation well below target for two years

Thursday, 5 Dec 2013 | 8:54 AM ET

FRANKFURT, Dec 5 (Reuters) - The European Central Bank expects inflation to hold broadly steady well below its roughly two percent target over the next two years, dipping to 1.1 percent in 2014 before inching up to 1.3 percent in 2015, it said on Thursday.

The ECB's first inflation forecasts for 2015 were eagerly eyed by market participants to gauge how long the central bank may keep interest rates at or around a record low of 0.25 percent, a level it confirmed at its December policy meeting.

In its latest update of its staff projections, the ECB lowered its 2014 inflation outlook slightly to 1.1 percent from a mid-point of 1.3 percent in its September prediction.

The ECB raised the midpoint of its forecast for euro zone economic growth next year to 1.1 percent from a previous 1.0 percent and said the economy should improve to growth of 1.5 percent in 2015.

"Over the medium term underlying price pressures in the euro area are expected to remain subdued," Governor Mario Draghi told a news conference.

"Looking ahead to 2014 and 2015, output is expected to recover at a slow pace, in particular owing to some improvement in domestic demand supported by (our) accommodative monetary policy stance."