Friday, 8 February 2008
Euribor , ECB , Recession and Housing Market
After the ECB press conference, it appears that not only Trichet , The ECB president, has soften its tone toward risk to inflation but seem to have given signals for probable rate cuts (probably April).
At the same time, the U.S. is or will be about to enter into a recession and with it, UK is following suit.
Europe starts to see some scary signs of a slowdowns. Usually it always starts in the periphery of Europe : Spain and Italy for the South and Sweden, Denmark, Norway and Finland for the Nordic area.
The Euribor will fall and fall throughout the year and most probably until mid next year. This should match falls in housing prices as Europe might experience a recession which we don't known yet its nature whether is a mild or severe one.
So the target could be 3% by mid next year, then we will enter in a completely different world where inflation is a constant threat as some commodities become scarce : oil, food as the global consumer pool is increasing at a rate ever seen. Rate will have to be higher much higher than the average we have witnessed in the past 20 years...