Highlights
As expected and despite the chaos in world financial markets, the European Central Bank left their policy interest rate at 4.25 percent. ECB president Jean Claude Trichet has repeatedly said that the Bank's goal was to prevent second round effects from the run up in consumer prices. However now wage demands are soaring and with them, inflation expectations. Since the beginning of the credit crisis, the ECB has separated interest rate policy and measures needed to lubricate credit markets. However, now the spillover to growth is becoming increasingly evident and the extraordinary events assailing financial markets has complicated the ECB's jobs. Central banks round the world have aggressively stepped up their efforts to support financial markets, and have coordinated their efforts numerous times to provide additional liquidity. But the turmoil surrounding the U.S. plans to deal with toxic assets has sapped confidence badly and money markets have been gripped by a growing sense of paralysis. Although the Senate passed legislation last night, no action can be taken until the House of Representatives acts and the President signs the legislation.

September has been characterized by a mix of almost exclusively poor economic data and almost exclusively hawkish ECB commentary as the ECB battles to keep expectations of an early rate cut under control. Among the negative data were the German Ifo which hit a 40 year low, the gloom reflected in the EU's sentiment surveys and miserable purchasing managers surveys readings that plumbed 5 year lows.

The ECB recently cut its forecasts for gross domestic product growth in 2008 and 2009 but inflation continues to be a problem, running at its highest rate since the creation on the single currency in 1999. Fearing inflationary pressures remain untamed, policymakers have frequently thrown cold water on any suggestions that interest rates should be cut. However, eurozone inflation has come off its peak, retreating from 4 per cent in July to 3.8 per cent in August, helped by the pull back in oil prices this summer recent.

Needless to say, everyone will be listening closely to Trichet's opening remarks at his press conference that follows shortly.

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