ECB Faces The Highest Inflation Since 1994! by Milota Sidorova

According the expectations, European Central Bank (ECB) made decisions to avoid the inflation risk that threatened eurozone last month, reaching the maximum for last 14 years. European Central Bank, established in 1998, with its headquarters in german Frankfurt is responsible for monetary policy of eurozone. Its primary task is to assure the relative price stability, briefly spoken & keep the lowest inflation index as possible. Despite of present almost 4 percent maximum, the bank initially declared the promise of only 2 percents acceptable. Although the unemployment in 15 member state eurozone declined down to a record low of 7.2 percent, the indexes ( purchasing managers index & PMI and service index ) reached their lowest points for more than last three years. Falling retail sales and consumer sentiment imply the worries of following house loan crisis in U.S. market last September. "Inflation will remain uncomfortably high for the ECB," declared Michael Hume, European economist at Lehman Brothers. He suggested that ECB was firmly on hold for the time being with the weak growth outlook compensating for those inflation figures. The current ECB president Jean-Claude Trichet at the press conference pointed out, that the wage negotiations over the eurozone could cause sustained price hikes if excessive demands were forced through. In Maccario Aurelio' s (UnicCredit Group) opinion ECB needs to elegantely step away form its rate hike threats and towards a neutral stance. Holger Schmieding suggests that this is an example of "Stagflation Lite", that is an economy term for unstable combination of stagnating activity and inflation. ECB' s establishing declaration pointed out list of other aims, such as regional monetary policy, a conduction of foreign exchange operations and the exclusive right to authorize the issuance of euro banknotes.

related story: http://news.yahoo.com/s/afp/20080207/ts_afp/ecbeurozonebankrateforexmoney_080207131426;_ylt=AhO4kemPwkhlww66FLLnOySs0NUE

by Milota Sidorova for PocketNews (http://pocketnews.tv)

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