European Central Bank Likely To Keep The Interest Rates Steady

New York, New York (PressExposure) December 05, 2009 -- "ECB will scheduled a policy-making meeting on 3 December, Thursday with the agenda to balance the interest rates steadiness and formulating an exit strategy."

It is a necessary measure to formulate the exit strategy to come out of the strange liquidity gauges. The last week statement of ECB President indicate towards the exit strategies that would help to provide liquidity during the worldwide financial crisis that could impose inflation threats in the future.

Trichet cautioned EU banks not to get addicted to low-priced credit provided by the ECB and indicated that liquidity measure would be phased out in a timely and gradual manner to offset any fear to price stability over the medium and long-term trading.

Trichet indicated that the ECB would make the collateral financial support criteria tighter for the coming March auction. The tightening of the collateral ending criteria is the first step towards the ECB exit strategy.

On Monday, EU released report of CPI that indicates that it increased for the first time in last seven months. The increase in the EU inflation rate is expected to leave remarkable impact on the Thursday's ECB policy-making decision.

The increased CPI figures could push ECB members to shift to the time limit of an exit strategy as the inflation pressures are going to become stronger. The Forex trading market is monitoring the Trichet statement on the ECB's twelve-month auctions and the points of discussions in the meeting.

There are possibilities that the twelve-month auctions will be set to slip so that it becomes easy to make the liquidity operations for short-term loans. This is the beginning of the ECB's exit strategy.

In this meeting, ECB will also make known it's forecasts of financial and inflation rates fro 2010 and 2011. ECB is anticipated to improve its 2010 expansion estimates to 1% and 1.5% for 2011. In spite of the advancement in growth prospects the EU facing a weak recovery speed.

The viewpoint for weak economic recovery should bind any hurry by the ECB to make any further increments in the interest rates. The upcoming trading condition will make it clear that whether the ECB anticipate that the inflation rate should stay lower to 2% in 2011. The ECB will be in big trouble to increase the interest rates if the estimates linger below the target.

However, there is a long list of expectation from the meeting. The expectations are gradual withdrawal of liquidity measures and phasing out of the twelve-month auctions. However, whatever be the expectation the consequences will give the complete information about the impact of the meeting decision on the Forex market.

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Press Release Submitted On: December 05, 2009 at 5:46 am
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