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ECB head hopes EU economy will grow after rate cut

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The European Central Bank (ECB) hopes the eurozone's gross domestic product will grow in the second half of 2011, jits new President Mario Draghi said on Thursday after the bank unexpectedly cut interest rates by 0.25 percent to 1.25 percent.

The European Central Bank (ECB) hopes the eurozone's gross domestic product will grow in the second half of 2011, jits new President Mario Draghi said on Thursday after the bank unexpectedly cut interest rates by 0.25 percent to 1.25 percent.

The bank raised rates from 1.25 percent to 1.5 percent in July, prompting some criticism that it could choke off the region's feeble growth.

"Real GDP growth in the euro area, which slowed in the second quarter of 2011 to 0.2 percent quarter on quarter, is expected to be very moderate in the second half of this year," Draghi said.

Several analysts had forecast earlier this year that European GDP might fall in the next few years.

Inflation in the European Union in 2012 may drop below 2 percent, Draghi said.

"Looking ahead, rates are likely to stay above 2 percent for some months to come, before falling below 2 percent in the course of 2012," he added.

The EU's September inflation amounted to 3 percent, above the ECB's medium term limit of around 2 percent.

Draghi took over from former ECB head Jean-Claude Trichet on Monday. Analysts had predicted he might boost the bank's efforts to battle the eurozone's debt problem by cutting key refinancing rates in the next few months.

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