Trade Desk Thoughts from the ECB

The LFB submits:Trade Desk Thoughts: ECB Press Conference Bullet Points

• The Governing Council decided to leave the key ECB interest rates unchanged
• The latest information confirms that towards the end of last year economic activity in the euro area continued to expand
• The euro area has been benefiting from a turn in the inventory cycle and a recovery in exports, as well as from the significant macroeconomic stimulus
• Low capacity utilization rates are likely to dampen investment
• Unemployment in the euro area is expected to increase somewhat further
• Concerns remain relating to a stronger or more protracted than expected negative feedback loop between the real economy and the financial sector
• Euro area annual HICP inflation increased further in December 2009 to stand at 0.9%, after 0.5% in November
• Inflation is expected to remain moderate over the policy-relevant horizon, with overall price, cost and wage developments staying subdued
• Inflation expectations over the medium to longer term remain firmly anchored
• The annual growth rates of M3 and loans to the private sector were negative in November, standing at -0.2% and -0.7% respectively
• M3 and credit growth are likely to remain very weak or negative for some time to come
• Banks have continued to reduce the size of their overall balance sheets, mainly through downsizing the assets held vis-à-vis other banks
• We will continue our enhanced credit support to the banking system, while taking into account the ongoing improvement in financial market conditions and avoiding distortions associated with maintaining non-standard measures for too long
• Euro area governments are faced with high and sharply rising fiscal imbalances.
• High levels of public deficit and debt would place an additional burden on monetary policy and undermine the credibility of the provisions of both the Treaty on European Union and the Stability and Growth Pact
• The Governing Council therefore calls upon governments to decide and implement in a timely fashion ambitious fiscal exit and consolidation strategies
• Sound balance sheets, effective risk management, and transparent as well as robust business models are key to strengthening banks’ resilience to shock

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