The European Central Bank (ECB) has confirmed today that the world economy, including the Eurozone, is experiencing a 'marked economic slow-down' and that demand would be 'very weak' in 2009.

In the bank's April bulletin, it underlined the fact that inflation looked set to stay around the 2% mark in the medium term, as hoped, and that economic recovery would come in a very gradual way in 2010.

After reducing interest rates again at the beginning of the month, the ECB is confident that prices will now remain stable, maintaining purchasing power levels in the Eurozone.

As far as the financial markets are concerned, the ECB's bulletin confirmed that 'all available data shows that economic activity has been substantially weakened in the Eurozone during the first few months of 2009 and it was unlikely to improve much during the rest of the year, but that gradual recovery was expected in 2010'.

The ECB considers that an equilibrium has returned to the economic markets and forecasts that the reduction in the cost of raw materials, coupled with the economic measures already implemented, could actually bring about much better results than previously anticipated.

According to the ECB, this reduction in raw material prices is one of the main reasons for the drop in inflation rates, which is set to continue falling at least until the middle of the year, when it could well reach negative figures, before going back up again.

As far as the money supply is concerned, the ECB maintains that the situation is 'highly volatile' at the moment.  The rhythm of monetary expansion in the Eurozone is still showing a marked slow-down, which should equate to lower risks for price stability in the medium term.

The ECB did, however, report that the credit flow to non-financial entities and individuals was still 'very limited'.