“monitor very closely price developments”は金利据え置きのメッセージ。
European Central Bank President Jean- Claude Trichet signaled the bank intends to raise interest rates next month, saying “strong vigilance” is warranted to contain inflation.
Latest data confirm “continued upward pressure on inflation,” Trichet said in Frankfurt today after the ECB kept its benchmark lending rate at 1.25 percent, as forecast by all 52 economists in a Bloomberg News survey. “Accordingly, strong vigilance is warranted.”
The euro dropped more than a cent and German government bonds fell after Trichet said the ECB hadn’t raised its 2012 inflation forecast from 1.7 percent, fueling speculation the bank won’t raise rates as quickly as previously expected. While policy makers are concerned about oil-driven inflation feeding into wage demands, the danger is that higher borrowing costs may exacerbate the sovereign debt crisis that’s threatening to push Greece toward a default.
“Even if the peripheral countries are struggling, inflation remains the focal point for the time being,” said Ken Wattret, chief euro-area economist at BNP Paribas in London.
The euro fell to $1.4490 at 3:30 p.m. in Frankfurt. German two-year note yields declined four basis points to 1.62 percent and ten-year yields were also down four basis points at 3.02 percent.
The ECB’s monetary policy “remains accommodative,” Trichet said. Still, the bank is “not signaling any particular pace for the next decisions on our interest rates,” he said. “We are not pre-committed. We decide on interest rates when we judge it is necessary to deliver price stability.”
While the ECB today raised its growth and inflation forecasts for this year, it predicted both will slow in 2012.
The ECB increased its 2011 inflation forecast to 2.6 percent from the 2.3 percent, and left the forecast for next year at 1.7 percent. The 17-nation euro-area economy will grow 1.9 percent in 2011, up from the previous 1.7 percent projection. Growth will slow to 1.7 percent in 2012, the ECB said, reducing its forecast from 1.8 percent.
Euro-area inflation has been in breach of the ECB’s 2 percent limit since December. The bank tightened borrowing costs in April for the first time in almost three years and economists expect it to take the benchmark rate to 1.75 percent in October, a Bloomberg survey shows.
‘On the Upside’
“Risks to the medium-term outlook for price developments remain on the upside,” Trichet said. “It is of paramount importance that the rise in inflation does not translate into second-round effects in price and wage-setting behavior and lead to broad-based inflationary pressures.”
While Germany, Europe’s largest economy, is driving the region’s recovery, countries from Ireland to Portugal are struggling to grow after increasing spending cuts to rein in deficits. German Finance Minister Wolfgang Schaeuble opened a rift with the ECB this week over how to respond to Greece’s debt crisis, advocating that private investors also share the burden.
The ECB has opposed anything beyond a voluntary rollover of debt to avoid what European Union Economic and Monetary Affairs Commissioner Olli Rehn has called a “Lehman Brothers catastrophe.”
“We are not in favor of restructuring, haircuts and so forth,” Trichet said. “We call for avoiding all credit events and selective defaults. We exclude all elements which are not voluntary.”
With banks in Greece, Ireland and Portugal reliant on central bank funding after lending dried up, Trichet said the ECB will keep its emergency liquidity measures in place for as long as necessary and at least through the third quarter. The central bank is lending banks as much money as they want at its benchmark rate for periods of up to three months.
“The provision of liquidity and allotment rate will be adjusted as appropriate, taking account that all non-standard measures are by construction temporary in nature,” Trichet said.