Euro-area experts trim 2007 inflation forecast: ECB poll

(FRANKFURT) - A regular survey of professional economic forecasters conducted by the European Central Bank showed Thursday that experts expect the annual rate of inflation in the euro area to reach 2.0 percent this year and then come down slightly to 1.9 percent in 2008.

In its regular quarterly "Survey of Professional Forecasters", the ECB said that the respondents were downgrading fractionally their assessment for the outlook for inflation in the single currency area this year, but maintaining their forecast for next year.

In the previous survey in November, the experts had projected an annual inflation rate of 2.1 percent this year for the 13 countries that share the euro.

"This downward revision largely reflects the recent fall in oil prices and generally lower oil price assumptions," the ECB wrote.

"Inflation is, however, expected to be affected by the German VAT (value-added or sales tax) increase in January," which the experts estimated would, on average, add 0.3 percentage point to annual euro area inflation in 2007, it continued.

VAT in Germany was increased by three full percentage points this year to 19 percent.

The ECB defines price stability as an annual inflation rate close to but below 2.0 percent.