Growth is the big eurozone story, say analysts - Emirates24|7

Growth is the big eurozone story, say analysts

SLOW GROWTH A slowing European economy sees demand fall, which means inflation becomes less of a concern GETTY IMAGES

Inflation in the euro zone has been on the wane while there is also evidence that a widely expected downturn is now at hand, analysts say.

The European Central Bank has focused on fighting inflation even as the euro hit record highs against the dollar, but may now be able to contemplate cutting interest rates to spur economic activity.

The ECB's money supply measure for the 15-nation eurozone showed growth in March had slowed and home loans in particular were slipping back amid corrections in the Spanish, Irish and French housing markets. "The deceleration in mortgage lending is probably occurring at a faster pace than the central bank had anticipated," said Gilles Moec, an economist at Bank of America.

"Growth is becoming the big story now," UniCredit Markets economist Marco Kramer said. Howard Archer at Global Insight agreed, saying: "The growth outlook could deteriorate quite sharply and quickly."

Against that backdrop, inflation becomes less of a concern since in a slowing economy demand falls, normally taking pressure off prices.

Jennifer McKeown at Capital Economics said: "We think the ECB's attention is going to turn to slowing activity and probably a lot sooner than markets think." (AFP)