FRANKFURT (MMI) – The current monetary analysis is signalling
medium-term price stability in the Eurozone, the European Central Bank
said Thursday in an explanatory note accompanying its new book,
“Enhancing Monetary Analysis.”
“The monetary analysis confirms that inflationary pressures remain
contained. Indeed, the baseline view implies a medium-term outlook for
price developments in line with price stability,” the statement said.
Policymakers see neither deflationary nor inflationary risks at the
present time, it said.
However, the central bank warned of risks to this baseline
scenario, suggesting that the latest data may signal emerging upside
inflationary pressures.
“A rapid acceleration of monetary and credit growth, which in view
of some recent monetary data cannot be excluded, would need to be
treated as a potential harbinger of upside risks to price stability,”
the ECB said.
On the other hand, “should monetary dynamics weaken again and/or
fail to recover in line with historical regularities owing to tensions
in the financial sector, deflationary risks may increase,” it said.
The central bank reiterated its assessment that “the underlying
pace of monetary expansion is stronger than headline M3 figures
suggest.”
The ECB’s analysis also confirms that “credit growth is behaving in
line with historical relationships,” suggesting that Eurozone companies
and households are at no risk of a credit crunch.
“Taken as a whole, the euro area banking system has not engaged in
exceptional deleveraging that would imperil the flow of loans to
households and corporations,” the statement said.
–Frankfurt bureau; +49-69-720 142; email: jtreeck@marketnews.com
[TOPICS: MT$$$$,M$X$$$,M$$EC$,M$$CR$,MGX$$$]
