As Expected ...
At today’s meeting, which was held in Paris, the Governing Council of the ECB took the following monetary policy decisions
1. The minimum bid rate on the main refinancing operations of the Eurosystem will be increased by 25 basis points to 3.25%, starting from the operation to be settled on 11 October 2006.
2. The interest rate on the marginal lending facility will be increased by 25 basis points to 4.25%, with effect from 11 October 2006.
3. The interest rate on the deposit facility will be increased by 25 basis points to 2.25%, with effect from 11 October 2006.
More comments will follow later as Trichet makes his statement but I think I already know what he is saying; a good mix excess liquidity and vigilance against inflation. What will be interesting though is to see what hints we are given to the future course.
Dave Altig also reports on the ECB raise and provides us with those hints I asked for in my first post.
'The hints have arrived.'
'(...) This decision reflects the upside risks to price stability over the medium term that we have identified through both our economic and monetary analyses. Today’s decision will contribute to ensuring that medium to longer-term inflation expectations in the euro area remain solidly anchored at levels consistent with price stability. Such anchoring is a prerequisite for monetary policy to make an ongoing contribution towards supporting sustainable economic growth and job creation in the euro area. Also after today’s increase, the key ECB interest rates remain at low levels, money and credit growth are strong, and liquidity in the euro area is ample by all plausible measures. Our monetary policy therefore continues to be accommodative. If our assumptions and baseline scenario are confirmed, it will remain warranted to further withdraw monetary accommodation. The Governing Council will therefore continue to monitor very closely all developments so as to ensure price stability over the medium and longer term.'