The European Central Bank Governing Council consists of 18 members. The Committee meets twice a month. The first monthly meeting of the month is devoted to monetary policy. Changes in monetary policy if any are announced immediately after the meetings. A press conference is held about 45 minutes after the meeting ends. A statement is read concerning their action -- or lack of it -- followed by a question and answer period. The ECB does not publish any minutes for its meetings. Why Investors Care
| Released on 2/8/07 | |||||||||||||||
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Highlights
As expected, the European Central Bank left its policy interest rate at 3.5 percent. The ECB has a 2 percent inflation ceiling and for the past five months, the harmonized index of consumer prices has been below that mark. Evidence is growing that Germany's increase in its value added tax had little impact on prices and spending. Although price increases have eased, the ECB has been alarmed by fast growth in M3, the broad money supply measure it watches closely as part of its analysis of inflation trends. M3 grew at an annual rate of 9.2 percent in November, the fastest since 1990.
In his press conference, ECB president Jean Claude Trichet signaled an interest rate increase would probably occur in March. He used the code words, 'extreme vigilance', which in the past has indicated that a rate increase is in the offing at the next meeting.
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The ECB monitors two "pillars" of monetary policy - the harmonized index of consumer prices (HICP) and M3 money supply - in its objective to control inflation. The ceiling for HICP growth is 2 percent. M3 growth is targeted at a 4.5 percent reference growth rate. The Bank had trouble controlling both but was reluctant to increase interest rates until December 2005. In November, the flash HICP was up 3.0 percent while money supply growth expanded at a rate of 11.7 percent for the three months ending in October when compared with the same three months a year earlier. After a series of rate increases, the ECB is expected to remain on hold for at least the next several months. |
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