05 May 2005

EZA 678: ECB Council Post Meeting Assessment

ECB Observer; May post-meeting assessment
As foreseen recently in markets - and by EZA for several months now - rates probably (barring political or oil price accidents) on hold well into 2006. Policy stance re-balanced slightly: more recognition of recent weak growth but continuing concern about high oil prices and (despite recent easing) monetary growth. Slight shift in language: continued vigilance 'warranted' rather than 'of the essence'. Rate cuts, even preparation for them, ruled out as counter-productive; but, if need be, rates would be raised.

SummaryEZA Conclusion: This again validates EZA's long-held central prognosis that rates should remain on hold well into 2006 ...... BUT .... political/second-round-inflation risks, if they materialised, could trigger earlier action.

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© Graham Bishop