Amidst sovereign debt crisis and enduring recession, the confidence of Euro-zone has been falling sharply with the economy performing short of the expectation and unable to stabilize the economy. Along with falling economic sentiments, the inflation expectations among market participants, including producers, service sectors and household has been rising significantly forcing the European Central Bank to be concerned about interest rate movement, more precisely cutting down of the interest rate and stabilize the economy.

Market analysts and economists after minutely scrutinizing the price levels in Euro-zone identified the stagnating pressure persisting in the economy in the first three month of the year quarter-on-quarter and contraction of about 0.2 percent during April to June period. In line with ongoing pessimist market sentiment, downturn of economic indicators or variables and other supporting factors, the economists forecast further contraction of Euro zone and ultimately taking the ‘free market economy’ to a recession. According to the commission survey, the market sentiments in industry and service sector declined to -16.1 and -12 respectively in the month of September from higher levels in the month of August (-15.4 and -10.8 in industry and services respectively.)

With gloomy economy, sentiments among consumers in the Euro-zone have fallen to -25.9 points from previous level of -24.6. Despite the economic pressures, only the construction sector revealed positive outlook with improve in confidence level by 1.2 points. Having these economic downturns, the European Central Bank has to consider all the incoming economic inputs prior to adjusting the interest rates to enhance the economic outlook. Considering these scenarios, some economists suggest that the monetary measure controlling body should also consider the market sentiment and address the price level and stability in the single currency zone.

The entire world is witnessing the economic cycles going on in the Euro zone and is in wait and watch mode to witness whether the economy actually enters another recessionary phase or would be able to stop itself from entering into another economic downturn, ‘A Recession.’