Eurozone interest rates left unchanged

Ralph Atkins in Frankfurt Financial Times; February 7 2008 12:45

Eurozone interest rates have been left unchanged by the European Central Bank as it seeks to bring surging inflation back within its target range.

The decision to leave its main policy rate at 4 per cent was widely-expected after eurozone inflation last month hit a 14-year high of 3.2 per cent. The ECB’s concerns that a temporary rise in price pressures could become longer-lasting are thought to have outweighed fears about growth.

However, comments by Jean-Claude Trichet, ECB president, later on Thursday will be scrutinised for any sign that the ECB could lower borrowing costs in coming months. Financial markets have priced-in three, quarter-percentage point cuts by the end of this year.

Last month, when interest rates were also left unchanged, Mr Trichet had hinted that the central bank could still raise rates “pre-emptively” to head off the inflationary dangers posed by higher wage settlements. The 21-strong ECB governing council had only discussed “two possibilities,” he said on January 10, making clear that a cut was not then on the central bank’s agenda.

But since that date, financial markets have seen dramatic falls while economic surveys have pointed to a sharp deterioration in growth across the 15-country eurozone region at the start of this year – especially in the service sector. Some on the governing council are likely to have argued that the recent financial turbulence will help restrain wage demands by trade unions – reducing the need for it to take as hawkish a stance.

Still, signs of a substantial slowdown underway are not yet convincing. Germany reported a smaller than expected fall in manufacturing orders in December. The 1.7 per cent drop followed a 3 per cent rise in November. The Berlin economics ministry said the figure pointed to “positive developments” in industrial production in coming months.

The ECB aims to keep the eurozone’s annual inflation rate “below but close” to 2 per cent. It has been outside that range since August last year.

Comentario: a pesar de la crisis en Estados Unidos y al igual que en Colombia, el BC europeo decidió dejar quieta su tasa de interés de intervención en 4% por tres razones;

1) la inflación está por encima de la meta de estado estacionario del 2%. Una inflación anual de 3,2% en enero (la mayor desde 1999 cuando empezó el BCE)

2) los sindicatos están haciendo demasiada presión para que aumenten los salarios

 3) Aunque habrá una desaceleraciòn -por lo que se puede ver hasta ahora- no hay sintomas de recesión generalizada en Europa a causa de la crisis de EEUU.

Los fundamentos -ecuación de paridad de intereses sin sustitucion imperfecta de activos- indican entonces que habrá una mayor apreciación a corto plazo del euro frente al dólar.

Como es usual en estos casos el sector financiero pide bajas en la tasa de interés; pero una tasa del 4% en Europa sigue siendo acomodaticia, o neutral cuando mucho; es decir, es una tasa de interés que acompaña el crecimiento de la economía sin restringirlo. No se puede decir todavía que estén corriendo la LM (o IA en términos actuales) a la izquierda o que se esté por encima de la regla de Taylor.

JPF

———————————————————————————

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s