Tuesday, July 26, 2011

ECB in state of strong vigilance on inflationary pressures

Reuters/FT Deutschland: ECB in state of very ‘strong vigilance’ – Noyer...Just what the doctor ordered (not!) as the relief on the Greece package unravels in double quick time. But a rate hike in August does not look to be on the cards, though this does vindicate a general view (but NOT ours!) that the ECB will not hike rates again until ‘at least’ October - it also puts a premium in sensitivity terms to this week's German, Spanish, Italian and Eurozone CPI data for July. 
The ECB is in a state of strong vigilance on inflationary pressures, ECB policymaker Christian Noyer said in a newspaper interview, using a phrase the bank has previously used to signal a rate hike. Rising costs of some raw materials and tax increases in some euro zone countries meant there was a risk of price rises despite some easing of economic growth in the second quarter, the Financial Times Deutschland reported him as saying. "Therefore, the ECB Council remains in a position of very strong vigilance, without us deciding in advance what we will do," the Bank of France chief said in the interview, published in the newspaper's Tuesday edition.

Published: 26 July, 2011
written by: Bill Hubard , Chief Economist at Markets.com