(desi atunci am facut bani frumosi iar anu' asta pierzui cam 10%).
European Economies: ECB Raises Inflation, Growth Forecasts
Nov. 30 (Bloomberg) -- The European Central Bank raised its 2006 inflation and economic growth forecasts for the 12 countries sharing the euro, a person familiar with the matter said. The bank has signaled it's preparing to increase interest rates as soon as tomorrow to keep inflation under control.
The central bank now expects inflation to average 2.1 percent in 2006 and 2007, said the person, who declined to be identified because the forecasts are yet to be released by the ECB. The bank expects the economy to expand 1.9 percent next year and 2 percent in 2007. That compares with the bank's Sept. 1 forecasts for inflation of 1.9 percent in 2006 and growth of 1.8 percent.
``A more favorable growth outlook and upside risks to inflation are going to be the justifications for higher interest rates,'' said Guillaume Menuet, senior economist at Moody's Investors Service in London. ``For the first time we have 2006 and 2007 inflation forecast above the ECB's limit.''
Surging oil prices have kept inflation at or above the ECB's 2 percent limit for 10 months this year, prompting ECB President Jean-Claude Trichet to say the central bank is now ready to ``moderately augment'' borrowing costs. The Frankfurt-based bank has kept its benchmark interest rate at a six-decade low of 2 percent since June 2003 and last raised it in October 2000.
The price of a barrel of oil reached a record $70.85 on Aug. 30 and was at $56.39 today, still 30 percent higher than at the start of the year. The ECB said on Nov. 10 that the euro-region economy ``has shown considerable resilience'' to rising oil prices and that ``activity is currently strengthening.''
OECD's Call
The Organization for Economic Cooperation Development yesterday predicted growth of 2.1 percent in the euro region next year after 1.4 percent this year. That's slower than growth in the world's biggest economies. The U.S. economy, the world's largest, will expand 3.5 percent next year after 3.6 percent this year, while Japan will grow 2.4 percent this year and 2 percent in 2006, the Paris-based OECD said in its semi-annual economic outlook.
It urged the ECB to refrain from raising interest rates until the European economy has gained more momentum.
``With the recovery expected to be moderate and any oil-price induced second-round effects on wage inflation being uncertain,'' ``monetary policy should remain on hold for some more time, with tightening starting in earnest later next year,'' the OECD said.
``The bank's line has been clear,'' ECB Executive Board member Lorenzo Bini Smaghi said in a speech in Milan, Italy, today. ``We raise rates in a limited way to assure inflation stays low. In the U.S. the rates are 4 percent, in Europe they are 2 percent, maybe tomorrow they will rise to 2.25 percent.''
Core Inflation
Consumer-price inflation in the euro region was 2.4 percent in November from a year earlier after 2.5 percent in October, the European's Union's Luxembourg-based statistics office today. The new ECB forecasts show core inflation, which strips out energy and food prices, accelerating to 1.6 percent in 2006 and 2.1 percent in 2007 from 1.4 percent in 2004.
``They see core inflation moving up and approaching headline rates, which I think is quite an important signal,'' said Lorenzo Codogno, co-head of European economics at Bank of America in London. ``It's clear the most likely course of action is a series'' of interest rate increases, ``not just one.''
Trichet told the European Parliament Nov. 21 ``it would not be a good working assumption to consider that we are at the start of a series of interest-rate increases.''
Economists at the ECB and the 12 national central banks produce economic forecasts in June and December, and the Frankfurt staff updates them in March and September. The new estimates will be announced by Trichet at a press conference following tomorrow's council meeting.
ECB's Record
ECB forecasts overestimated expansion in four of the past five years. Its December estimates for the following year overshot the actual rate by an average of 0.6 percentage points for 2001 through 2004. Each 0.1 percentage point in growth is currently equivalent to around 9 billion euros ($10.6 billion) of gross domestic product.
The ECB kept its latest 2005 inflation forecast at 2.2 percent and raised its 2005 growth prediction to 1.4 percent from 1.3 percent, the person familiar with the matter said. The bank's forecasts assume the euro exchange rate will average $1.25 this year and $1.19 in 2006 and 2007. They assume the oil price will average $55 a barrel this year, $60 next year and $59.5 in 2007.
The ECB is concerned workers will demand wage increases to compensate for higher energy costs, while too much liquidity in the economy stokes inflation as economic growth picks up. The expansion in M3 money supply has exceeded 4.5 percent, the level the ECB says is non-inflationary, every month since May 2001.
Faster Growth
The euro-area economy grew 0.6 percent in the third quarter from the previous three months, when it expanded 0.4 percent, the EU's statistics office said today.
Retail sales in Germany, Europe's largest economy, increased 1.9 percent in October from September and the unemployment rate in France, Europe's third-largest economy, fell in October to 9.7 percent, its lowest in two and a half years, government reports showed today.
Investors have increased bets the ECB will raise rates by as much as 75 basis points by September next year, futures trading shows. The implied rate on the three-month contract for September settlement was at 2.93 percent today compared with 2.62 percent on Oct. 24. The contracts settle to the three-month euro area inter- bank offered rate for the euro, which has averaged 15 basis points higher than the ECB benchmark rate since the currency's launch in 1999.
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Nr. 3493 de miercuri, 30 noiembrie 2005
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