EURO ZONE

摘要

ECB Faces Slower Growth-Stronger Inflation Challenge Despite lingering stock market shakiness and slowing economic activity, the ECB kept interest rates on hold on January 10. Given the US Fed's spate of recent rate cuts (and more expected to come - see page 1), the ECB has faced mounting political pressure to prioritise growth prospects over inflation-targeting and follow suit. However, December inflation soared above-target to 3.1 % (y-o-y) while producer prices jumped from 3.3% (y-o-y) in October to 4.1% in November. Forecasts for both variables in 2008 have seen an upgrade this month. Looking ahead, oil and food costs show little sign of decelerating and the ECB has even raised the possibility of "pre-emptive" rate hikes ahead of forthcoming wage settlements (particularly in Germany's public sector).