ECB Council Preview; central expectation remains rates on hold even well into H1 2006
Inflation still 'sticky' at 2.1% but 'core' inflation falls further below ECB's 'price stability' range Despite 0.5% Q1 GDP growth, demand pressure still very weak. Upside risks to inflation and downside risks to growth remain. EZA's central expectation still: rates on hold even well into H1 2006. Weaker euro dilutes attenuating effect of earlier rise on costs but ECB not expected to respond to initial market reactions to French (and Dutch) 'No'. NB: Major indicators due in next three days and Staff's mid-year macro projections will be available at this month's meeting
SummarySTILL NO RATE CHANGE SEEN THURSDAY, AND EVEN INTO H1 2006: UPSIDE INFLATION RISKS REMAIN BUT DEMAND PRESSURES SUBDUED
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© Graham Bishop
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