Friday, 18 April 2008

Up Up ...the next move?

" European Central Bank council member Axel Weber said the bank will assess whether current interest rates are high enough to contain "intolerably" high inflation.

Recent wage dynamics in conjuncture with elevated and persistent energy and food price pressures have increased the risk of a prolonged period of intolerably high inflation,'' Weber said in a speech today in Frankfurt. ``We will have to continuously monitor closely all incoming data and evaluate whether the current level of interest rates in fact ensures'' price stability.

Weber is the second ECB policy maker this week to suggest that the bank's next step is more likely to be a rate increase than a cut. Surging food and energy prices pushed euro-region inflation to 3.6 percent in March, more than initially estimated and the fastest pace in almost 16 years, the European Union's statistics office said yesterday.

That could be big.."up up" for the interest rates which would automatically mean "down down" for the housing price...just logical.

Imagine that the ECB embark into rising interest rates instead of decreasing them. The impact would be absolutely disastrous for the housing market.

I think it's more rethorics than real.

On the other hand, in Finland we have clearly signs of second-round effect materializing, so there is ground for Bank of Finland to be worried.

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