EZA 663: ECB Council Preview March 2005

28 February 2005

No rate change seen Thursday: Prospective inflation worries, but weak demand pressures: rates on holdto end 2005/early 2006
Limited amount of new data support our last-time view that balance of debate is now tilted slightly towards inflation concerns fuelled by liquidity growth. Demand and most cost pressures so far weak, inflation expectations ease, but....... Hints of second-round effects of commodity price rises on output prices. Key data on prices, unemployment, growth and confidence due this week but ..... Expect rates on hold until data show GDP growth rate near 1 3/4% - 2% trend - end-2005 or Q1 2006, with possible 50 bp hike then

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© Graham Bishop