The interest rate: will they or won't they

later12

Yes, they probably will.

Tomorrow sees an interest rate setting announcement by the ECB, who are widely considered likely to increase their refi interest rate to 1.25%, up a quarter of a percent.

The real question, I think, is whether or not this is the beginning of an interest rate increase cycle. To answer that question we must look at inflationary likelihoods at the European core. Incidentally, today saw the release of disappointing German industrial production figures which is obviously the result of inflationary pressures both domestically and in emerging markets.

So how can the ECB balance the economic health of the strong European core with the stability requirements of the weak periphery? Lets see what tomorrow brings.

whiteonion

I hope they jack up the interest rates alot so we get a strong Euro, it benefits someone like me who saves quite alot.

dan_d

It's likely that they will. But whether they will continue to do it each time, or whether they'll let the dust settle for a couple of months and see how it works out before they go again....that is the question.

RichardAnd

whiteonion wrote: »

I hope they jack up the interest rates alot so we get a strong Euro, it benefits someone like me who saves quite alot.

IT would benifite me greatly too but it would also be something less than a boon to many others.

Taxi Drivers

whiteonion wrote: »

I hope they jack up the interest rates alot so we get a strong Euro, it benefits someone like me who saves quite alot.

Where do you spend your money?

astrofool

There is too much debt in the system, savers are going to have to get burned somehow to devalue the debt to a reasonable level, the Euro won't sustain 20-30 years of austerity measures needed to pay down the debt. Higher than normal inflation is inevitable, Germany is going to have to suck it up at some point, or see the Euro crumble via countries defaulting.

Cookie_Monster

frankly I'm a little surprised it'll only be 1/4% and not 1/2

bamboozle

Cookie_Monster wrote: »

frankly I'm a little surprised it'll only be 1/4% and not 1/2

its seldom they would move by 0.5%, given the fiscal unrest in ireland, greece and portugal plus economic impact of japan earthquake i'd say the chance of a 0.25% increase is about 70%.

DoubleBogey

It's the usual story of rates being too low when we needed them high and now rates going up when we need to keep them low. We're nothing to Europe. A tick on the beasts back. I have absolutely no doubt they will continue to jack them up. It's all about Germany and France. Makes you wonder what the whole point is.

Boskowski

later10 wrote: »

Incidentally, today saw the release of disappointing German industrial production figures which is obviously the result of inflationary pressures both domestically and in emerging markets.

Where do you get that from?

As it happens right now I'm reading in my daily German online paper that..

- expectations for growth in 2011 are being corrected upwards to 2.8%
- unemployment going down from 7.7% to 6.5%
- inflation at 2.4% for 2011 expected to decrease to 2.0% in 2010 (2011 mostly due to ressource & energy prices)

I understand that's not the same as industrial production figures but the number of people in employment also rose by 430000

regards

Carsten