ECB 8 November Council Preview
NO RATE MOVE EXPECTED 8 NOVEMBER: ECB's WAIT-AND-SEE STANCE SET TO CONTINUE BUT, IF MARKET RATES NORMALISE, 4 1/4% 'REFI' LIKELY MID-2008.
· Latest economic and monetary data and continuing financial market tensions point to ECB expected to remain in wait-and-see mode with tightening bias again this month.
· With significant downside risks to growth and upside risks to price stability remaining and little sign yet of market conditions normalising, EZA's central view is postponement of 'refi' rate rise to 4 1/4% until mid-2008.
· Should market turmoil abate more quickly than now seems likely and risks to growth subside, 4 1/4%'refi' rate could come in 2008 Q2, with 4 1/2% possible in Q3 or Q4.
· If turbulence worsens, ECB could be forced to cut rates but with a view to raising them later once the situation returns to normal.
© Graham Bishop
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