ECB president Jean-Claude Trichet delivered this key paragraph in his introductory statement at a press conference held in Vienna.
To sum up, a cross-check of the information identified under the economic analysis with the outcome of the monetary analysis has confirmed the existence of upside risks to price stability over the medium term, against the background of good economic fundamentals in the euro area. Accordingly, and with money and credit growth vigorous in the euro area, our monetary policy stands ready to counter upside risks to price stability, as required by our primary objective. At the same time, given the heightened level of uncertainty, additional information is needed before further conclusions for monetary policy can be drawn. Consequently, the Governing Council will monitor very closely all developments. On the basis of our assessment, and by acting in a firm and timely manner, we will ensure that risks to price stability over the medium term do not materialise and that medium and long-term inflation expectations remain firmly anchored in line with price stability, which is all the more important in the current context. As regards the financial markets, we will continue to pay great attention to developments over the period to come.Eurozone inflation accelerated above the 2% target rate in August and stands now at 2.1%.
According to Trichet recent money supply record figures may be overstating actual M3 growth as a result from the flattening yield curve and recent market volatility.
Data Shows Monetary Policy Still Accommodative
The ECB has dropped the phrase about an "accommodative monetary policy" stance for the first time since October 2005. Dropped words are one thing - and the hard data in the most recent weekly financial statement of the Eurosystem shows the opposite. The ECB's longer term refinancing transactions now stand with 265 billion Euros at almost double the former pre-summer average of 150 billion Euros.
First Gold PURCHASES by a Central Bank
I also cannot forego a light chuckle when seeing that gold reserves have been revalued to the tune of 8.4% at the end of Q3 2007.
According to the ECB last week saw also the first gold coin purchases by a central bank from the Eurozone since its inception. Gold is the best performing asset of the Eurozone's reserves but has been dumped over the last 8 years when central banks began to prefer yield carrying investments.
I doubt that these investments have really delivered more profits than leaving the bars in the vaults. Not that this would have been of any interest to the press corps in attendance...
My Inflation Is a Lot Higher
Having relocated to Vienna again (and still suffering from jet lag) I am experiencing acute and severe sticker shock. Following are some price raises since April.
- City parking fees rose 50%.
- Public local transport rose 13.3%.
- Bread costs now 3 Euros for half a kilo, roughly 1,200% more than when I started monitoring bread prices 35 years ago (and 10plus percent only in 2007.)
- Pizza in my favourite place rose 14.9%.
- Gasoline costs about 20% more.
- Milk and milk products rose around 15%.
- Butter rose 25%.
As these figures will probably not add up to the official inflation rate of 2.1% but result in significantly higher personal outlays I conclude one more time: Consumer price indices have nothing to do with reality and are kept artificially low as governments have to pay inflationary increases in many index linked contracts.
How much longer will consumers accept this betrayal?