THE TAKEAWAY: ECB monthly report sends mixed message -> Inflation risks seen, but central bank expects inflation to align to forecasts -> Euro drops ahead of release but stabilizes as markets digest
The moderate economic recovery seen recently is subject to downside risks as inflation threatens to devalue the Euro, the European Central Bank’s monthly report for April said today. The statements were in line with ECB chief Draghi’s policy speech earlier in the month.
The Euro sank ahead of the ECB’s release but stabilized later on as markets digested the mixed messages.
The ECB’s Governing Council said it plans to keep interest rates unchanged, and mentioned that it expects price developments to remain stable. The report mentioned a “moderate recovery” seen in the beginning of 2012, but warned that inflation risk remains a factor in price action. However, the ECB also said it has the tools to combat inflation in the short and long terms. The central bank expects inflation to align itself with the ECB’s targets as the year progresses.
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