Policy still on accommodative - ECB

 

European Central Bank (ECB) monetary policy remains on the accommodative side even after last week's rate rise and its Governing Council will keep a close watch on inflation, the ECB said today.

The comment came in the bank's June bulletin, which was a near-repeat of the statement by ECB President Jean-Claude Trichet after the bank raised rates on June 6th to 4 from 3.75 per cent. The economic analysis did give extra thoughts on wages and money supply growth, however.

"Given the positive economic environment in the euro area, our monetary policy is still on the accommodative side, with overall financing conditions favourable, money and credit growth vigorous and liquidity in the euro area ample," the ECB said.

"Acting in a firm and timely manner to ensure price stability in the medium term is warranted. The Governing Council will monitor closely all developments to ensure that risks to price stability over the medium term do not materialise," the bulletin's editorial said.

Financial markets interpreted Mr Trichet's recent comments as indicating the ECB will raise rates to 4.25 per cent later this year. A minority see a further rise to 4.5 per cent by the end of the year.