Brussels, 11/01/2007 (Agence Europe) - As expected, on Thursday 11 January, the Governing Council of the European Central Bank (ECB) decided not to alter interest levels in the eurozone. The minimum bid rate for main refinancing operations remains at 3.50%, therefore. Interest levels on the marginal lending facility and deposit facility stay at 4.50% and 2.50% respectively. This status quo was expected by experts, following December's 25-base point rise (see EUROPE 9323). ECB President Jean-Claude Trichet once again warned against the risk of price slippage in the eurozone. He, therefore, left the door open for a further rise in levels, which economists expect to come in March, rather than in February.
Justifying the Governing Council's decision to leave levels unchanged, Mr Trichet said at his press conference that the information that had become available since their last meeting had further under-pinned the reasoning behind the decision to increase interest rates in December. It also confirmed that “very close monitoring of all developments is of the essence so that risks to price stability over the medium do not materialise”. “Our monetary policy continues to be accommodative,” he said. Therefore, in future, “acting in a firm and timely manner to ensure price stability in the medium term is warranted,” he warned.
In his economic and monetary analysis, Mr Trichet repeated that the Governing Council still felt that there was a risk of price rises. He warned particularly of the risk of renewed oil price increases and a possible higher than expected increase in wages, based on the eurozone's still solid growth. “It is therefore crucial that social partners continue to meet their responsibilities,” he said, alluding to current wage negotiations, especially in Germany. Over the medium to long term, “continued strong monetary and credit growth in an environment of ample liquidity point to upside risks to price stability,” he warned. In November, annual M3 growth soared to 9.3%. Even though this rise may have been influenced by “temporary factors”, it remained the “highest annual rate of growth since the introduction of the euro,” he noted. Looking ahead, said Mr Trichet, “annual inflation rates are projected to hover around 2% over this year and next”.
On economic performance, the ECB noted that activity in the eurozone remained “robust”, despite a slight slowing in the second half of 2006. The medium-term outlook for economic activity “continues to be favourable and the conditions remain for the eurozone economy to grow solidly, at rates around potential”. (lc)