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FRANKFURT (MNI) – Monetary policy in the Eurozone is still
“accommodative” and risks to the medium-term outlook for prices remain
“on the upside,” the Governing Council of the European Central Bank said
Thursday after deciding to leave its key interest rates unchanged.
The Council will continue to “monitor very closely” developments
with respect to upside risks to price stability, ECB President
Jean-Claude Trichet told reporters after its meeting here.
The comments suggest that the central bank’s tightening bias
remains in place, but that a third rate this year is unlikely to be
decided at the next policy meeting in September.
This comes as little surprise, as analysts have scaled down the
likelihood of another hike before the end of the year in light of
slowing inflation, waning economic growth and the resurgence of tensions
on financial markets amid the risk contagion from Greece’s debt
problems. Forward markets have virtually priced out a further rate hike
this year.
Turning to the ongoing economic soft patch in Western countries,
Trichet said that the ECB had already anticipated a slowdown in Eurozone
activity in Q2. He warned that there was a high level of uncertainty as
to the path of both Eurozone and global growth in the coming months.
“On the real economy, I have said that the first quarter was
exceptionally buoyant,” he said. “And we were expecting a slowing down.
We will observe a slowing down in the second quarter and we will see
what will happen in the third quarter.”
–London newsroom: 4420 7862 7492;
email: wwilkes@marketnews.com/ drobinson@marketnews.com
[TOPICS: M$$EC$,MT$$$$,M$X$$$,MGX$$$,M$$CR$]
