Prospects for the European Union and the Euro Area look sound, but there is a risk of a significant slowdown in the US. Central banks in the European Union should stand ready to offset any deflationary impacts from abroad. The appreciation of the euro and lower oil prices should help moderate prospective inflation in the Euro Area.This report was produced by the Euroframe group of European Research Institutes. The Institutes involved are WIFO in Austria, ETLA in Finland, OFCE in France, IfW and DIW in Germany, Prometeia in Italy, CPB/NBEPA in the Netherlands and NIESR in the UK