ECB head dampens speculation about multiple rate hikes
Friday, 27 June 2008
BRUSSELS, June 26 (AFP): European Central Bank (ECB) head Jean-Claude Trichet distanced himself yesterday from suggestions of a series of interest rate rises in the Eurozone ahead of an expected 25-basis-point hike next month.
"I did not say that we would envisage a series of increases, I did not say that," Trichet told the European parliament.
"I said we could decide to move our rates by a small amount in our next meeting in order to secure the solid anchoring of price expectations."
His remarks to the committee on economic and monetary affairs of the European parliament in Brussels came amid widespread expectations that the ECB will raise its key rate by a quarter of a point to 4.25 per cent on July 3.
The bank finds itself battling Eurozone inflation, which hit a record 3.7 per cent in May, at a time when growth shows signs of slowing sharply.
Both in large part are a result of high oil prices, which Trichet said were not caused first and foremost by speculation, as has been suggested by officials from the Organisation of Petroleum Exporting Countries (OPEC). Trichet said that the most recent price shock resulted above all from rising demand, with tighter supplies and speculation playing a secondary role.
"We had a phenomenon that was obviously demand driven in comparison with what we had in the previous oil shocks that were much more supply driven," Trichet told the European parliament.
"There are the three elements and we have to be as attentive as possible to disentangle the three elements," Trichet said.
"I did not say that we would envisage a series of increases, I did not say that," Trichet told the European parliament.
"I said we could decide to move our rates by a small amount in our next meeting in order to secure the solid anchoring of price expectations."
His remarks to the committee on economic and monetary affairs of the European parliament in Brussels came amid widespread expectations that the ECB will raise its key rate by a quarter of a point to 4.25 per cent on July 3.
The bank finds itself battling Eurozone inflation, which hit a record 3.7 per cent in May, at a time when growth shows signs of slowing sharply.
Both in large part are a result of high oil prices, which Trichet said were not caused first and foremost by speculation, as has been suggested by officials from the Organisation of Petroleum Exporting Countries (OPEC). Trichet said that the most recent price shock resulted above all from rising demand, with tighter supplies and speculation playing a secondary role.
"We had a phenomenon that was obviously demand driven in comparison with what we had in the previous oil shocks that were much more supply driven," Trichet told the European parliament.
"There are the three elements and we have to be as attentive as possible to disentangle the three elements," Trichet said.