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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: zonder who wrote (16847)11/26/2004 6:10:37 PM
From: mishedlo   of 116555
 
Issing says ECB cannot react to short-term impact of external shocks UPDATE
Thursday, November 25, 2004 5:23:15 PM
afxpress.com

(updating with comments on wages)
BERLIN (AFX) - European Central Bank chief economist Otmar Issing said the ECB cannot change interest rates in response to the short-term impact of external developments, such as this year's sharp rise in oil prices

"Monetary policy is powerless to deal with the short-term impact of exogenous shocks such as a rise in oil prices or increases in indirect taxes," Issing said in a speech

He said this needs to be understood by wage negotiators, who can be assured that the ECB will maintain price stability over the medium term

"Nothing is more damaging for confidence as when price increases erode the real value of wage agreements," he said

Issing said monetary policy can only foster growth and employment through its contribution to economic stability

"Stability from the perspective of monetary policy means stability of the value of money" he said

He added; "Stability of the value of money is not everything, but without it there is no sustained development of growth and employment."
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