Guy Quaden, ECB council member said that the delay in the US economy would be more distinct than expected which suggests that ECB would amend its development forecasts prepared in the month of December. On February 12th Quaden told the reporters that they have to forget what had happed in December and try to reassess it. He even said that it is obvious that the delay in the United States would be extra pronounced than the earlier forecasts.

During the last week Jean-Claude Trichet the ECB president said that the insecurity about the forecasts for the economic developments is curiously high. On 29th January the International Monetary Fund reduced its development forecasts for the Euro region by almost half point to 1.6 % since the Housing markets in US slump threatens to hold back worldwide economic development.

Quaden also added that even if the Euro region is not completely dependent on the United States compared to the previous year then they would not say that they are resistant, however certain corruptions through the channel of economic markets is substantial. According to the projections of December that would be revised in the month of March, until now the ECB anticipates development in the 15 nations of the Euro region to slowdown to 2 % in the present year from 2.6 % in the year 2007.

With reference to the last week’s conference of the governing council of ECB, Quaden said that they have stressed out more than the earlier downfall that risked the developments in the region. It was the tense situation in the month of December and the slowdown of development which may be profound due to the outcome of the increase rate over the average term.

Inflation demands

The inflation in the Euro region was up to 3.2 % in the month of January, the best since last 14 years and higher than the ECB’s 2 %. Following the Federal Reserve of US and the reduced interest rates in the Euro region, the ECB seems to be in tremendous pressure since the development prospects got worse. Dissimilar to the Federal Reserve, the primary consent of ECB is to hold inflation.

The standard rate of European banks is at 4 % and the policy makers will have a meeting on 6th March to decide on the rates. Most of the market traders did guess that the economic hold back will force the European Central Bank to shift its workings on the monetary policies. The oblique rate for the month of December on the Euribor was at 3.45 %, behind from 4.36 % which was in 2007.

Emergency Cut

The Federal Reserve reduced its standard rate by 1½ % point to 3 % point on January 30th, subsequent to the three quarter point cut a few days earlier. The Federal; Reserve pointed out that it may reduce the rates again in order to avert the US economy from falling into a slump. The upcoming information on the economic development in the Euro regions 15 nations is said to be mixed exclaimed Quaden. Belgian and German market assurance suddenly increased in the month of January which indicated the development in these markets may possibly survive the slowdown in US. He even said that they will monitor, discuss and analyze the situation even when they maintain their rates steady.

Tags: ECB: European Central Bank News, European Economy News //