Europe - ECB & BOE 01 (May 08 - Nov 11)

[kennynah]

14 May 2008 18:13 GMT
ECB Ordonez: Can't Allow CPI To Continue High Indefinitely
BARCELONA -(Dow Jones)- European Central Bank Governing Council member Miguel Angel Fernandez Ordonez said Wednesday the ECB can't allow inflation to continue high over its target level indefinitely.

"No, we have to continue what we're doing...though it's impossible for inflation to come down when oil prices are at their current levels," Fernandez Ordonez said on the sidelines of a conference.

Though euro-zone inflation has been running at over 3% in recent months, far above the ECB's target of less than 2%, the central bank says it is focused on preventing the pass-through of soaring oil and food prices to other prices.

It is also focused on keeping mid-term inflation expectations anchored.

Fernandez Ordonez, who is also the governor of the Bank of Spain, said he sees "almost no risk" of Spain falling into recession.

Earlier Wednesday, government data showed Spanish gross domestic product growth in the first-quarter grew at an annual rate of 2.7%, the lowest rate in more than five years, and at a quarterly rate of 0.3%, the lowest rate in more than 10 years.

[kennynah]

better watch this carefully....fx traders and oil junkies...

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14 May 2008 18:21 GMT
BULLET:
ECB: Ordonez- Will implement monpol in line with meeting inflation goal,
to continue providing adequate liquity for mkts. To urge moderation in
business margins, labor costs. Wage moderation, productivty gains are
essential. Spain econ must offset unemployment in construction.

[kennynah]

20 May 2008 10:29 GMT


BOE: Received Total Bids Worth GBP3.96 Billion For 3-Mo Funds
LONDON -(Dow Jones)- The Bank of England said Tuesday that it allotted GBP1.6 billion in three-month funds against bids worth GBP3.96 billion at a weighted average accepted rate of 5.095%.

That gave a bid-to-cover ratio of 2.48. That compares with a bid-to-cover ratio of 1.01 at April's auction, when the BOE supplied GBP15 billion in three-month funds against bids for GBP15.15 billion, at a weighted average rate of 5.253%.

The lowest accepted rate Tuesday was 5.051%, with institutions that asked for that rate receiving 96% of the funds they were bidding for at that rate. The U.K. central bank rate is 5.0%. The highest accepted rate was 5.15%, the BOE said.

Last month, the central bank launched a radical new facility, offering banks short-term government debt in exchange for high quality, but hard-to-sell assets. The BOE expected initial use to be around GBP50 billion, but there's no arbitrary limit.

[kennynah]

23 May 2008 17:54 GMT


IMF sees no scope for UK interest rate cuts
LONDON (Thomson Financial) - Britain's central bank must be ready to raise interest rates at the first clear sign of higher wage settlements and there is no room for rate cuts now, the International Monetary Fund said on Friday.

"We see no scope for further near-term monetary easing, absent assurances of continued wage moderation, fiscal policy that is tighter than planned, or signs that house price or credit developments are significantly curbing domestic demand," the IMF said in a report on the UK economy.

"Given the risks to the nominal anchor, monetary policy should stand ready to tighten at the earliest clear signs of emergent nominal wage inflation," it said.

[kennynah]

this has become a very familiar comment across all ECB members..

but what is different is that eurozone is actually suffering from higher inflation, as the months go by...

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02 Jun 2008 10:16 GMT

UPDATE: ECB Liebscher: Will Do Everything Needed To Lower CPI
(Adds Liebscher comment.)

FRANKFURT -(Dow Jones)- The European Central Bank will do everything that is needed to dampen currently high inflation rates in the euro zone, Klaus Liebscher, a member of the ECB's governing council, said Monday.

"No doubt, the current environment is a challenge. But we will do everything needed for inflation to recede again," Liebscher told reporters on the sidelines of celebrations of the ECB's tenth anniversary.

The annual rate of inflation in the 15-nation euro-zone reaccelerated to 3.6% in May from 3.3% in April, well above the ECB's medium-term policy objective of just below 2%.

It is important that people's inflation expectations don't rise, Liebscher said. The ECB has kept its key policy rate unchanged at 4% throughout the financial market crisis in light of an unfavorable inflation outlook.

Liebscher said that the euro's "current exchange rate helps somewhat to cushion the negative consequences" from rising commodity prices around the globe.

The European single currency has appreciated against the U.S. dollar and other major currencies. At 0954 GMT, it traded at $1.5552, compared with $1.5525 at 0719 GMT, according to EBS.

[winston]

Victoria Marklew (Northern Trust): European Central Bank sounds hawkish tone

“As expected, the European Central Bank (ECB) left its refi rate at 4.0% again this morning. What was not expected was the hawkish tone of the subsequent statement and the press briefing from President Trichet.

He noted that the Governing Council had a ‘deep discussion’ and remains ‘in a state of heightened alertness’. Some members apparently wanted a rate hike this month but the consensus was to hold. The President then noted that the Council may decide to make ‘a small hike’ at the July 3 meeting in order to anchor inflation expectations. The euro promptly firmed anew.

“So, what are the odds of a July rate hike? The ECB’s mandate is to keep inflation ‘below but close to 2%’ in the medium term. That qualifier allows some wriggle-room – the Council can say that current conditions are temporary and prices will come back toward target in the ‘medium-term’ and can define that however it sees fit.

For now, our hunch is that the Council will continue to talk tough but the consensus to stand pat will prevail. As always, though, watch the data.”

Source: Victoria Marklew, Northern Trust – Daily Global Commentary, June 5, 2008.

[winston]

BCA Research: BoE stubborn as economy melts

“The Bank of England (BoE) remains fixated on inflation risks and opted to leave the official Bank Rate unchanged at 5%, as expected.

“According to the BoE’s May Inflation Report, the central bank sees the risks in the current macro environment as very asymmetric, with inflation posing a significant threat and weak but manageable downside for growth.

We disagree with the central bank’s assessment and hold a much more bearish outlook for growth. Indeed, the latest macro data suggests that the economy is deteriorating rapidly. Real estate prices are already plunging faster than our models had warned, with Nationwide house prices down 4.4% YoY and commercial real estate price inflation contracting at a double digit pace.

“Consumer confidence continues to drop to new cyclical lows and the PMI services index has slipped below its boom/bust line. While retail sales volume growth has held up reasonably well, this is largely due to aggressive price discounting and our models warn that dramatic headwinds are building. In turn, it is likely that consumer price pressures will ease in the coming months.

“Bottom line: Stay overweight gilts within a global hedged fixed income portfolio. The BoE is making a policy mistake by remaining hawkish and will be forced to play catch up later this year.”

[winston]

John Mauldin on Trichet:-

Over in Europe, I noted last week that one Jean Claude Trichet, the president of the European Central Bank, virtually promised the markets a series of rate hikes. This sent the dollar into the tank and the euro back to new highs. Gold loved it.

But this week has seen a very unusual set of speeches by fellow ECB members disavowing Trichet's promise, and even Trichet had to try and "explain" away what he had said. "We aren't talking about a series of rate hikes. Maybe, just possibly, we would raise in the event of more inflation." Confusion reigns. There is clearly not consensus at the ECB.

You can bet Trichet heard from various finance ministers in the countries whose economies are weakening. They are not interested in a stronger euro or higher rates. What one person called the PIGS countries are surely objecting (Portugal, Italy, Greece and Spain, whose economies are not exactly robust).

And their objections are the same ones that would be made here. What good would a rate hike do? How much more oil or corn would be produced? Why increase our pain when there could be no positive result?

[kennynah]

a case of damage control....
perhaps the reason for USD strengthening since last Thurs..

[kennynah]

means what???

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16 Jun 2008 12:32 GMT
ECB WELLINK: Exchange rate is not a policy target