De Standaard Online

Weekly Updates

• As expected, the European Central Bank (ECB) increased interest rates in the Euro-zone by 25bp last week, lifting them to 4.25%.
• The ECB has made it clear that it is worried current high inflation rates will lead to a general rise in inflation expectations and wage settlements. If this occurs, there is a risk that inflation in the Euro-zone gets stuck at a permanently higher rate.
• The ECB has gone out of its way to emphasise that it does not see this move as the start of a series of rate hikes, but there is little doubt that it would act again if it felt that inflation expectations had not been sufficiently damped.

• Euro-zone inflation for June hit 4.0%, its highest level since the beginning of the monetary union and 2% above the ECB’s target rate.
• As with most of the world’s inflation, the main contributors have been food and energy. Core inflation remains at a relatively subdued 1.7%.
• But the ECB remains concerned with the potential for pass through into higher Euro-zone wages. Based on the lagged relationship between resource utilization and headline inflation, the latter is set to remain elevated around current levels until at least the end of 2008.

De Standaard Weblog op 8 juli 2008 om 16:56 | Link

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