Hawk ECB Vs Dove BOE

on March 26 2008 7:35 AM

The BOE expects economic growth to slow down sharply this year, while they expect inflation to remain elevated above their 2% target due to rising energy and prices along with wage pressures, yet they see inflation to drop later this year, the BOE also said that the ongoing turbulence in the financial markets remains a threat due to rising short term volatility, though the falling Pound in the last period helped economical growth in the U.K.

Mr. Trichet on the other hand remained Hawkish as he stressed the ECB are still focused on inflation which rose to a 14-year high at 3.3 percent on rising food and energy prices, the short term outlook for inflation remains highly elevated above the 2% target, while on the medium term the outlook remains for upside risks to price stability.

On the 15-nation economical growth, the ECB president indicated that the economy continues to grow on a moderate pace, yet uncertainty remains high concerning the outlook for growth, but Mr. Trichet stressed that anchoring inflation expectations is the ECB's highest priority, over the medium to long term.

Before that we had some upbeat data from both Germany and the Euro Zone, confidence in Germany came much better than expectations highlighting that even with the higher Euro, the 15-nation's biggest economy could cope with above $1.50, while industrial production also came better than expectations, confirming Mr. Trichet's testimony.

The U.K are suffering the hell of a U.S credit meltdown, especially since their economy depends a lot on the services sector that counts for almost 3/4 of the economy, the financial sector have been one of the most hurt sectors in both the U.S and the U.K, yet the BOE indicated that the current situation is nothing near what happened to the U.S economy! The BOE had cut their rates down to 5.25 percent, and economists believe the BOE will be forced into cutting their rates further by the end of this year!

Meanwhile the Euro Zone are still holding up strong against all odds, the credit crunch have hit other economies real hard, but the 15-nation economic fundamentals remained sound, even after the Euro surged to a record high against the Dollar at $1.59, economists were betting the ECB will be forced into cutting rates this year, but Mr. Trichet came out to diminish all those expectations!

Prospects of a recession in the United States are hitting everyone, economists believe the Japanese economy is on its way to recession as well, rising food and energy prices are providing central banks around the globe with little to do, though the Feds and other central banks are throwing out every little trick they can manage to come up with, but investors remain skeptical over the worthiness and credibility of those implemented actions!

More News from IBT MEDIA