Interest Rates: More Than Ever, ECB on Standby

The 31 economists polled by Agence France-Presse (AFP) and the financial agency Thomson Financial News expect the continuation of the monetary status quo at the next meeting of the Board of Governors, which will be held Thursday in Athens.

“Despite several weaker trend data, the ECB will maintain its key interest rates given the inflationary dangers that persist,” said Stefan Mütze, an analyst at Helaba, summing up the general view.

Given the fact that inflationary pressures are slowing down consumption in the first EZ economy, Germany, the political fight against inflation defended by the ECB is relevant, say many economists.

Beside, the decline of the euro against the dollar in recent days will also be closely monitored. The strength of the euro, which reduces the invoice for oil and raw materials denominated in dollars, has so far dampened price pressures.

An effect that would disappear if the euro had “to fall rapidly because of a change in the assessment of the market,” said Pierre Delage at Oxford Economics, who forecast a statu quo for the interest rates throughout the year and a rebound in 2009.

The entire panel of economists AFP / TFN, however, are betting on a decline in rates when price pressures will have eased, but not before the third quarter of 2008 at the earliest.

Last month, they were still 10 to bet on a decline in the second quarter.

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