Brussels, 20/01/2011 (Agence Europe) - The European Central Bank (ECB) is concerned about the rise in commodity prices, which feeds into the price of food and therefore leads to inflation, and the ability of EU agriculture to respond to global demand. Both ideas are expressed in the ECB's monthly report published on Thursday 20 January. The ECB explains that food commodity prices shot up in 2010, giving the example of wheat, corn and soya. Inflationary pressure is expected to be strong in the long-term, it explains, due to strong global demand and persistent uncertainty about farmers' ability to meet demand. Inflation is expected to exceed 2% in 2011 but dip again before the end of the year. In the ECB's view, prices must be closely monitored because there is the risk of inflation in energy and raw materials.
In the annual report, the ECB points out that tension about the sovereign debt of eurozone countries has not only arisen for Greece, Ireland and Portugal, but also for Spain, Italy and Belgium. The underlying dynamics of the eurozone are “positive” but there is still a “high” level of uncertainty, it adds, because of tension on parts of the money market and the risk of increased energy prices. In the final quarter of 2010, pay rises in the eurozone were the lowest on record (1.4%), due to pay being held back in Italy and Germany.
In a speech in Chicago published on the ECB website, Lorenzo Bini Smaghi, who is on the ECB's executive committee, states that the independence of central banks is key to ensuring price stability during a crisis and is a vital component of effective monetary policy. (Gp/transl.fl)