Thu, May 8 2008, 14:02 GMT
by Przemysław Kwiecień
European Central Bank did not change interest rates, and this is hardly surprising. There must be, however, many disappointed faces (including the Italian Prime Minister Silvio Berlusconi) who had hoped for at least a vague sign of the future monetary easing. Nothing of that kind. President Trichet once again pointed to the threat of persistent high inflationary expectations, stemming from a combination of supply shocks and tight labor market conditions. Moreover, he shrugged off the recent weak industry data, underlining that the high growth in developing countries will support activity in the euro zone. Furthermore, he noticed that the US credit market meltdown had no noticeable impact on monetary aggregates in the zone so far and that the dynamics of lending to non-financial companies remains solid. Taking all that into account one cannot expect any rate cuts in the foreseeable future, and its not unlikely that the first change will actually be a hike. Such a perspective works in favor of the euro, which gains more than 0,5% to the US dollar.
Published on Thu, May 8 2008, 14:03 GMT
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