THE European Central Bank is revising its inflation forecasts for the Eurozone, its president Jean-Claude Trichet told the European Parliament yesterday, sounding a more doveish note than in any previous public appearance in recent months.
“Risks to the medium-term outlook for price developments are under study in the context of the ECB staff projections that will be released early September,” he told MEPs.
The ECB has controversially raised interest rates twice this year, breaking ranks with the Federal Reserve and the Bank of England and prompting criticism that it could send fragile peripheral Eurozone economies into a tailspin.
Trichet’s remarks are the first sign that the ECB is shifting its concern from inflation to growth after a turbulent month in global markets. He added that uncertainty over growth remains “particularly high”. The Eurostoxx 50 rose 2.2 per cent yesterday after his comments.
But the tension among Eurozone leaders shows little sign of abating. Finland yesterday proposed that Greece be forced to transfer billions in state assets into a holding account in Luxembourg as collateral for further aid, a move that would be likely to enrage Greek voters.
And Germany put back a crucial vote on Greece’s new aid package by a week, increasing the weeks of uncertainty that markets must face this autumn.