01 April 2009

EZA 888 Report: ECB Observer

ECB 2 April Council Preview 
 

DEEPENING RECESSION WHILE INFLATION DROPS TO NEW LOW, BUT RATE CUT NOT EXPECTED UNTIL 'NON-STANDARD' EASING MEASURES ARE DECIDED

· Monthly indicators and survey evidence point to further falls in activity during 2009 Q1.

· Statistical base effects cause 'headline' inflation rate to plummet from 1.2% 0.6%.

· Labour costs have been rising strongly, but external costs remain subdued and industry's factory gate prices continue to fall.

· Money and credit growth continue to slow, supporting Governing Council's view that upside risks to price stability in the medium term have diminished.

· Next - probably final - rate cut expected to be held back until ECB decision on what further 'non-standard' easing measures can be announced.
 

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