FXstreet.com (Barcelona) - According to the ECB president, jean Claude Trichet, inflation will moderate its growing pace gradually in 2008, although upside risks to price stability will remain over the medium term. With that outlook the Bank will work to anchor CPI expectations.
Euro Zone's economy, according to Trichet, is showing signs of ongoing growth, although its pace has moderated, industrial activity has weakened and consumer sentiment has gone through substantial deterioration, anyway, Euro Zone's economy is based upon sound fundamentals, and does not suffer major disbalances.
Against this background, Trichet has reaffirmed his determination to maintain price stability in the medium term as well as the commitment to prevent second round effects.
The uncertainty surrounding economic growth, remains high, and downside risks prevail, specially risks from the financial market turbulence, which could have a stronger impact on real economy than previously anticipated, according to the ECB's president. Besides unanticipated increases on energy prices could accentuate the impact on consumption and investment.
The risks for inflation remain on the upside as energy and food costs could increase further, same accounts for some wage-setting tendencies that, according to Trichet, could add to inflationary pressures.