ECB: Trichet still hawkish

Thu, Apr 12 2007, 14:24 GMT
by Niels-Henrik Bjørn

Danske Bank A/S


As expected, the ECB’s Governing Council left key interest rates unchanged at today’s meeting. However, at the press conference, ECB President, Jean-Claude Trichet, was exactly as hawkish as expected indicating that at least one further rate hike is on the horizon. Indeed Trichet said in the Q&A session that he would “do nothing to change market expectations of a June rate hike”.

In the prepared statement Trichet did not voice any significant changes compared to the statement last month. Trichet thus confirmed the hawkish stance of the Governing Council consistent with further tightening of policy. We noted a few minor changes in the statement, which we would not give much attention:

  1. Global growth is called “strong” - last month “robust”
  2. Wage negotiations will be monitored with “particular attention” - last month “very carefully”
  3. Credit growth is noted to have moderated, including credit to non-financial corporations. Trichet was more cautious and nuanced in his analysis this time, but the conclusion was the same; Namely that credit growth is still too strong and overall liquidity is ample by all measures

Overall, the press conference added nothing new, except for a confirmation of market expectations for a June hike. We stick to our expectations of a hike in June, and one more hike in H2-2007, probably September.

Published on  Thu, Apr 12 2007, 14:26 GMT

Danske Bank  | Holmens Kanal 2-12, DK-1092 Copenhagen
http://www.danskebank.com/ | danskeresearch@danskebank.com

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