04 January 2005

EZA 651: ECB Council Preview January 2005

ECB - No rate change expected; growth weak, inflation contained but liquidity excessive: rates on hold to end 2005
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SummaryAgain no change in interest rates in prospect at next Governing Council meeting, Thursday 13 January. Latest data confirm EZA's view last month that balance of risks has shifted away from immediate inflation concerns but....... Broad money growth and liquidity overhang still remain a potential worry, while output price rises warrant vigilance for fear of oil price pass-through effects. No signs of stronger growth: net exports disappear, domestic demand insecure. Expect rates to stay on hold, barring US$ crash/oil hike, at least until late 2005 - possibly into 2006. NB: key inflation, output price and confidence indicators due in next 3 days - an update will be sent to clients Monday 10 January.

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© Graham Bishop