Trichet remains strongly vigilant
Despite flagging up last week that Europe's sovereign debt crisis represents a serious risk to the eurozone, it appears that the European Central Bank's determination to hike rates remains unwavering. Trichet yesterday reiterated that the ECB remains in 'strong vigilance mode' implying that a rate hike next week remains very likely. Given the considerable tightening of financial conditions in Europe over recent weeks, exemplified by a very considerable retrenchment in credit provision by banks in highly-indebted countries such as Spain and Italy not to mention Greece and Portugal, their collective determination to continue to tighten monetary policy seems remarkable. Should the ECB proceed with this next move, they may come to regard it as one of their greatest policy mistakes. |
