www.fxstreet.com/news/forex-news/article.aspx?StoryId=23c0b4c0-2802-4f00-a2f4-3f35e6dc9763 Buba: CPI Outlook Warrants "Clear Commitment To Stability"
Mon, Apr 21 2008, 10:41 GMT
http://www.djnewswires.com/euBuba: CPI Outlook Warrants "Clear Commitment To Stability"
FRANKFURT -(Dow Jones)- The European Central Bank needs to show it is clearly committed to price stability in view of the currently strong price pressures in the euro zone, the Bundesbank said Monday in its April monthly report.
Price pressures have increased "extensively" in the euro zone in the past few months, making the monetary policy environment more difficult, the report said.
The ECB has kept annual inflation at an average of 2.1% since 1999, only marginally above its aim of "close to, but below 2%," and it has managed to damp the effect of external price shocks stemming from high energy, raw material and food prices, the Bundesbank said.
But the ECB's record of stability is no cause for complacency, the Bundesbank said, adding that current price pressures may compromise the ECB's standing and cause others to lose trust in it.
"In this environment a clear commitment to stability from monetary policy is necessary," the Bundesbank said, adding that globalization might fail to mitigate price pressures from now on.
The European Central Bank has set up a group of experts on labor costs to better understand the cyclical impact wages have on prices, the report said. The so called Wage Dynamics Network is scheduled to report its findings toward the end of 2008.
The WDN is working with microeconomic data and company surveys to asses the wage dynamics in the 15 countries that share the euro.
The Bundesbank report also cautioned against plans to raise German pensions 1.1% this year and 2% next year.
This would only increase the burden of the country's work force and make the pension system less sustainable, the report said.
Germany plans to reduce pensions by a real 5% between 2003 and 2010, but has fallen short of its targets so far.
The report said the planned pension hikes for 2008 and 2009 would worsen the outlook for a consolidation of the pension system in Germany.
-By Roman Kessler, Dow Jones Newswires; +4969 2972 5514;
roman.kessler@dowjones.com(END) Dow Jones Newswires
April 21, 2008 06:41 ET (10:41 GMT)
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