ECB Stark Hints At Gloomier CPI View Than Projections-Report
Mon, Dec 10 2007, 11:45 GMT
http://www.djnewswires.com/eu
FRANKFURT -(Dow Jones)- Euro-zone inflation could exceed European Central Bank and national central bank staff projections, ECB executive board member Juergen Stark said, according to news agency Market News.
Thursday, the ECB published the staff projections showing inflation between 2.0% and 3.0% in 2008, tapering off again to 1.2%-2.4% in 2009. The ECB governing council doesn't underwrite the projections.
Stark indicated that the governing council has come to a different conclusion than the staff projections.
"In the ECB governing council we came to another conclusion - that the risks to the stability of prices are, in fact, pointed upwards," Stark is quoted as saying.
His remarks suggest council members take a gloomier view on inflation developments than the projections indicate. The ECB defines price stability as an inflation rate just below 2%.
"That means that there exists the danger that higher inflation rates are to be expected later as well," he said. "to avoid that, we will monitor further developments very closely and then act in a timely manner in the event this should be necessary."
The ECB's governing council left interest rates unchanged Thursday, and the key refinancing minimum bid rate stands at 4.00%. At the policy briefing after the decision, Trichet reminded participants that the council doesn't underwrite the staff projections.
"They are an important input that we have, but they are an input. They aren't our own projections," Trichet said.
He noted that he said in November that the inflation hump evident in the euro zone now would be "more protracted" than previously forecast. The euro-zone inflation rate hit 3.0% in November, a 6.5-year high.
Stark, Trichet, and other ECB officials have emphasized that the bank won't tolerate the emergence of second-round effects, or the pass-through of higher energy and food prices into wages and general consumer prices.
"It is absolutely fundamental, a key working assumption, and we will do all that is necessary to ensure that there is no materialization of second-round effects," Trichet added Thursday.
He noted that he said in November that the inflation hump evident in the euro zone now would be "more protracted" than previously forecast. The euro-zone inflation rate hit 3.0% in November, a 6.5-year high.
Stark, Trichet, and other ECB officials have emphasized that the bank won't tolerate the emergence of second-round effects, or the pass-through of higher energy and food prices into wages and general consumer prices.
"It is absolutely fundamental, a key working assumption, and we will do all that is necessary to ensure that there is no materialization of second-round effects," Trichet added Thursday.
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