Saturday, 24 May 2008

Decrypting ECB's Trichet: a Rate Hike?

"European Central Bank President Jean- Claude Trichet said the shocks to Europe's economy from financial market turmoil and rising food and commodity prices aren't over, the Wall Street Journal reported, citing an interview."

"Europe is facing a protracted period of high inflation rates, the newspaper quoted Trichet as saying. Trichet also said the ECB would deliver price stability in the medium term, the newspaper said."

"The ECB has refrained from following the U.S. Federal Reserve and Bank of England in lowering interest rates to shore up growth after an increase in borrowing costs. While euro-region inflation slowed to 3.3 percent in April from a 16-year high of 3.6 percent in March, it's still above the ECB's 2 percent limit."


Anonymous said...

"The Chief Executive of HSBC Bank, Europe's biggest, on Tuesday urged central bankers to raise interest rates in order to fight inflation, and also said more regulation may be needed in the wake of the credit crunch."

Anonymous said...

In fact they stopped short of raising rates last july because of the credit crisis.

The ECB has not been able to fullfill its mandate (i.e inflation at around 2%), so now if they are really serious about inflation, they should act before it gets out of control.

I think in Finland it's already out of control as big pay rise have been settle. Even after fatty pay increase, Purchasing power have not been helped much because inflation is around 4%.

The people in parliament negotiated wages increase of more than 6% on the back on the public tax while some are not able to bargain any wage increase (the poor or middle class).

The gap is only increasing thanks to the center or right government.