ECB Observer; rates on hold - even to early 2006 - but potential futures market overshootInflation still 'sticky' but not far above (and 'core' inflation below) ECB's 'price stability' range
Continuing upside risks from oil/commodity prices and excess liquidity
Demand pressure very weak but
ECB so far confident activity will revive
EZA's central expectation still: rates on hold for many months yet
Futures market comes into line with EZA view – but potential overshoot
EZA alert to possible (low probability) market turmoil if French/Dutch vote 'No' to EU Constitution; also looking out for ECB's June macro projections
SummaryAGAIN NO RATE CHANGE SEEN THURSDAY, OR EVEN INTO EARLY 2006: UPSIDE INFLATION RISKS REMAIN BUT DEMAND PRESSURES SUBDU
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