Econoday Report: ECB Announcement 8, 2008

2008 U.S. Economic Events & Analysis

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ECB Announcement

Definition
The European Central Bank Governing Council consists of 18 members. The Committee meets twice a month. The first monthly meeting of the month is devoted to monetary policy. Changes in monetary policy if any are announced immediately after the meetings. A press conference is held about 45 minutes after the meeting ends. A statement is read concerning their action -- or lack of it -- followed by a question and answer period. The ECB does not publish any minutes for its meetings. Why Investors Care

Released on 5/8/08

Change
Actual	0bp
Previous	0 bp

Level
Actual	4.0%

Highlights
As universally expected, the European Central Bank kept their policy interest rate at 4 percent. However, opinions on the governing council are appear to be diverging as they try to come to terms with surging inflation and signs of a slowing eurozone economy. However, the ECB is in neutral and determined above all to keep inflation expectations anchored and not to permit second round effects from taking place. Although the HICP eased to an annual increase of 3.3 percent from 3.6 percent in March, it is considerably above the ECB inflation target of 2 percent. And M3 money supply growth is more than double its reference value of 4.5 percent. But there are signs of slower growth. For example, business confidence in Germany, Belgium and France all dropped as did the European Commission's economic sentiment index. And retail sales have disappointed as well while German orders and industrial production were down for the latest month.

As always, analysts will scrutinize ECB president Jean Claude Trichet's press conference and especially the key first paragraph and question-and-answer session. The chances are that Trichet will keep up his jawboning against inflation risks, suggesting that the ECB is much more concerned with price developments than with downside risks to the economy.

Trends

The ECB monitors two "pillars" of monetary policy - the harmonized index of consumer prices (HICP) and M3 money supply - in its objective to control inflation. The ceiling for HICP growth is 2 percent. M3 growth is targeted at a 4.5 percent reference growth rate. In September, HICP eased to 3.6 percent from 3.8 percent in August. Money supply growth has eased from its peak of 12 percent in October and November of 2007 but still expanded at a rate of 8.9 percent for the three months ending in September when compared with the same three months a year earlier.

Data Source: Haver Analytics | Consensus Data Source: Market News International and Thomson Financial

2008 Release Schedule

Released On: 1/10 2/7 3/6 4/10 5/8 6/5 7/3 8/7 9/4 10/2 11/6 12/4