Trichet toughened the language another notch in the opening sentence., referring to “heightened alertness” and he dropped the sentence that “we believe that the current monetary policy stance will continue to achieve our objective”
I think this is just one step off a pre-announcement of a rate hike now.
The new ECB staff inflation forecast has a mid-point of 3.4% this year, followed by 2.4% next year (as expected) - and assuming that there’ll be NO second round effects. The market sees upside risk, which has further increased since last month. The ECB staff sees GDP growth at 1.8% this year and 1.5% next year (marginally lower than market had expected), but Trichet went out of his way to say that they think growth will trough in 08 and then gradually increase.
“a number of members” thought they should hike rates “later”
Trichet is taking the market by storm this morning with his very hawkish commentary. The EUR is up big figures to 1.5565 already today after he states that the ECB could potentially raise rates next month given heightened inflation relating to its focus on price stability.
The decision to keep rates on hold was not unanimous…some voted to hike rates today.
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