The European Central Bank Monetary Policy Committee, as widely expected, has decided to hike interest rates by 25 basis points to 4.25% after their monthly policy meeting.
In the speech made after the decision Trichet said that this movement has been taken in order to prevent second round effects to price stability over the medium term. He did not give any hint over next interest rate moves as he reaffirmed the Bank's commitment to anchor price stability over the medium term.
Trichet, also said that he did not want to precommit on any future rate moves, and affirmed that the Bank's primary objective is to maintain price stability over the medium term, and, therefore, the Bank will do whatever is needed to keep medium term inflation in line with price stability in order to "preserve purchasing power in the medium term and continue to support sustainable growth and employment in the euro area."
Check the effect that the meeting is having over the pairs in our Rates and Charts Section or compare the movements of the different banks in our World Interest Rates Table. Or check the transcript of the live coverage: "ECB and Non-Farm Payrolls Live Coverage with Sunil Mangwani and Valeria Bednarik".
In-Depth Analysis
- · European and US summary - Euro Plunges on Trichet by Forexnews.com
- · Gold Investments Market Update - ECB Increases Rates as Trichet Warns of 'Exploding' Inflation by Gold and Silver Investments Limited
- · Mid-Day Forex Technical Report - Euro Pulls Back as Trichet Has No Bias, Dollar Rebounds by ActionForex.com
- · Daily Analysis - Dollar trading low as ECB decision looms by Finotec Group Inc.
Related News
- · ECB Hikes Key Interest Rate To 4.25% From 4% (Dow Jones)
- · ECB hikes rates to 4.25% (FXstreet.com)
- · Dollar Steady After ECB Rate Hike As US Jobs Data Loom (Dow Jones)
- · Trichet justifies rate hike to prevent second round effects to price stability (FXstreet.com)
- · Dollar Jumps After ECB's Trichet Less Hawkish Than Expected (Dow Jones)
- · Trichet says ECB rate hike intended to counter growing inflation risks (Thomson Financial News)
- · Trichet: Rate Hike To Prevent 2nd-Round Effects (Dow Jones)
- · EUR/USD: The Euro pulls back on Trichet’s comments (FXstreet.com)
Analysts' comments
- · Michael Woolfolk, economist at Bank of New York
"The failure of Trichet to signal any further ECB rate hikes and the failure of non-farm payrolls to live up to its negative whisper, prompted a sizable relief rally ahead of the long holiday weekend." - Thomson Financial News - · Philip Shaw, chief economist at Investec
"For now Trichet seems to be drawing a line under today's move. Things might change going forward, but for now there's nothing to suggest the ECB has an itchy trigger-finger." - Reuters - · Jean-Claude Trichet, European Central Bank president
"The ECB has strong determination to anchor inflation expectations. The Governing Council is monitoring price-setting behavior and wage negotiations in the euro area with particular attention." - Dow Jones
