The European Central Bank on Thursday slashed its forecasts for growth and inflation over the next two years, saying the outlook had deteriorated since its last staff forecasts were published in September.
The ECB forecast 2014 inflation at 0.5 per cent, rising slightly to 0.7 per cent in 2015 and 1.3 per cent in 2016.
The central bank's staff cut their prediction for economic output in the euro zone to 0.8 per cent in 2014, 1.0 per cent in 2015 and 1.5 per cent in 2016.
In September, ECB staff had predicted that inflation would stand at around 0.6 per cent in 2014, then rise to 1.1 per cent and 1.4 per cent in 2015 and 2016 respectively.
The euro zone central bank had also forecast in September that gross domestic product (GDP) would grow by 0.9 per cent in 2014 and by 1.6 per cent and 1.9 per cent in 2015 and 2016 respectively.
By lowering its forecasts, which show how the ECB expects the economy to develop, the euro zone central bank will heighten expectations that it will take further steps to bolster the bloc's flagging economy.
ECB President Mario Draghi recently threw the door open for drastic measures to prevent growth and inflation from sliding further and expectations are rising that a move could come as soon as the first three months of 2014.