The latest ECB monthly report says since November there has been more evidence that inflation has fallen further, while the financial turmoil has both intensified and broadened. Going forward, the report says “lower commodity prices and weakening demand point to inflationary pressures diminishing further” adding “price growth in the euro-zone is expected to be in line with the central banks’ definition of price stability over the policy-relevant horizon.”
Regarding growth, the ECB notes that tensions from the ongoing and intensifying financial crisis have spilled over into the real economy. In the euro-zone specifically a number of previously identified downside growth risks have materialized recently resulting in the 0.2% decline in GDP for the Q-3 of 2008. The report warns that “available survey data and the monthly indicators for October and November suggest economic activity has weakened further during the Q-4 2008.”
Meanwhile in the markets EUR/USD is seeing relatively steady trade so far this morning, presently at 1.3125. Elsewhere, as was wholly expected, the Swiss National Bank moved to trim rates 0.50 bps earlier this morning.
