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ECB warns threats intensified
Source: Bloomberg News |
September 9, 2011, Friday
|
Print Edition
Print Edition
EUROPEAN Central Bank President Jean-Claude Trichet said threats to the euro region's economy have "intensified" and inflation risks have eased as the region's debt crisis worsens.
The economy faces "particularly high uncertainty and intensified downside risks," Trichet said at a press conference in Frankfurt yesterday after the ECB left its benchmark rate at 1.5 percent. The ECB cut its growth forecasts for this year and next, and Trichet said inflation dangers are "broadly balanced." Last month those risks were on the "upside."
The spreading debt crisis is sapping confidence in European banks and driving up market borrowing costs, prompting economists such as Nouriel Roubini and Nobel Prize winner Joseph Stiglitz to urge the ECB to quickly cut rates. The central bank raised rates in April and July to combat price pressures.
The euro slipped after Trichet's remarks, falling as low as US$1.3987 from US$1.4043 before the press conference. The yield on Germany's benchmark 10-year government bond fell 8 basis points to 1.828 percent.
Since the July rate increase, the debt crisis that had already engulfed Greece, Portugal and Ireland has spread to Italy and Spain, the region's third- and fourth-largest economies. That forced the ECB to start buying Italian and Spanish bonds on August 8.
Investors have raised bets the ECB will cut its key rate by the end of the year, Eonia forward contracts show.
Fears of a renewed global slump have caused stocks to tumble globally and forced Japan and Switzerland to intervene to stop their currencies rising.
The economy faces "particularly high uncertainty and intensified downside risks," Trichet said at a press conference in Frankfurt yesterday after the ECB left its benchmark rate at 1.5 percent. The ECB cut its growth forecasts for this year and next, and Trichet said inflation dangers are "broadly balanced." Last month those risks were on the "upside."
The spreading debt crisis is sapping confidence in European banks and driving up market borrowing costs, prompting economists such as Nouriel Roubini and Nobel Prize winner Joseph Stiglitz to urge the ECB to quickly cut rates. The central bank raised rates in April and July to combat price pressures.
The euro slipped after Trichet's remarks, falling as low as US$1.3987 from US$1.4043 before the press conference. The yield on Germany's benchmark 10-year government bond fell 8 basis points to 1.828 percent.
Since the July rate increase, the debt crisis that had already engulfed Greece, Portugal and Ireland has spread to Italy and Spain, the region's third- and fourth-largest economies. That forced the ECB to start buying Italian and Spanish bonds on August 8.
Investors have raised bets the ECB will cut its key rate by the end of the year, Eonia forward contracts show.
Fears of a renewed global slump have caused stocks to tumble globally and forced Japan and Switzerland to intervene to stop their currencies rising.
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