Friday, June 16, 2006

Euro-zone Inflation Forecasted to Be Above 2% Until 2009

Financial Times report that the ECB forecast Euro-zone inflation will remain above 2% until at least 2009.

I am somewhat skeptical to say the least of the possibility of predicting consumer price inflation numbers so far into the future. Still though, it seems more likely than not that this forecast will come true given the far too high money supply growth and the weak structural growth potential of most Euro-zone economies.

What is interesting is that this forecast comes from the ECB. If they themselves believe this, why didn't they raise by more than a measly quarter point at the last meeting and indicate more clearly that more hikes are on the way? It is beyond me how anyone could consider the ECB to be inflation hawks.


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