02 July 2005

EZA 659: ECB Assessment

ECB Post Meeting Assessment
As expected, no change in interest rates. Stance still 'continued vigilance' but more stress on money and credit growth worries. Inflation volatility expected over coming months but ...... ECB still confident that inflation will subside later this year and recovery will pick up and broaden this year and next. Upside risks to inflation and downside risks to growth remain. Balance of argument still broadly neutral.

SummaryTrichet's remarks again confirm us in our view that - barring further major oil price or exchange rate shocks or clear evidence of second-round inflation effects - rates are likely to remain on hold at least until Q4 2005 and probably into 2006 Q1, but liquidity overhang could be trigger for rate increases once GDP growth rate seen to be close to trend

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© Graham Bishop