Friday, April 8, 2011

+25 Bp. (ls)

The ECB raised the key refinancing rate to 1,25% yesterday. Find the statement here.

Several points are worth mentioning:

  • The interest rate decision relies almost entirely on the economic analysis. Key drivers were rising commodity prices and expected increases of indirect taxes and administered prices due to the necessary fiscal consolidation. 
  • Trichet emphasized that the stance of monetary policy has still to be regarded as "accomodative". This wording makes further rate increases likely, especially if second-round effects occur. 
  • The growth rates of monetary aggregates are still moderate. The large liquidity positions of the financial system don't seem to contribute to the current inflation pressures. 
In general, this decision is a welcomed step back to doing business as usual and to refocusing on inflation targets rather than on financial market and currency union stabilisation.