The European Central Bank cut its forecasts for the euro zone economy for this year and next on Thursday but kept its forecasts for inflation broadly unchanged.
In a new outlook given after its monthly policy meeting, the ECB foresaw gross domestic product (GDP) declining by between 0.9 percent and 0.1 percent in 2013, lowering the top end of the forecast which had held out some hope of growth this year.
It also cut its forecast for growth next year to 0.0 and 2.0 percent from between 0.2 percent and 2.2 percent in its previous forecast.
It made little change to its forecasts for inflation, with both still indicating price growth was liable to be under its target of roughly 2 percent both this year and next. Inflation would be between 1.2 and 2.0 percent in 2013 from a previous forecast of 1.1 and 2.1 percent and between 0.6 and 2.0 percent in 2014.
"A gradual recovery should commence in the second part (of 2013)," ECB President Mario Draghi said during a news conference after the bank decided to leave the main refinancing rate at 0.75 percent.
"Inflation expectations for the euro area remain firmly anchored, in line with our aim of maintaining inflation rates below but close to 2 percent over the medium term. Overall, this will allow our monetary policy stance to remain accommodative."
(Writing by Patrick Graham; editing by Ruth Pitchford)