Tuesday, March 13, 2012

13/3/2012: Agility of ECBleese

One has to simply admire the ECB's 'guarded optimism' of things improving, yet worsening at the same time. Here's the recent statement from Frankfurt full of pearls, like (emphasis mine):

"March 2012 ECB staff macroeconomic projections for the euro area, which foresee annual real GDP growth in a range between -0.5% and 0.3% in 2012 and between 0.0% and 2.2% in 2013. Compared with the December 2011 Eurosystem staff macroeconomic projections, the ranges have been shifted slightly downwards."

So: "According to recent survey data, there are signs of a stabilisation in economic activity, albeit still at a low level. Looking ahead, we expect the euro area economy to recover gradually in the course of this year."

Now, wait... is it 'shifting slightly downwards' from already unpleasant levels, or is it 'stabilizing'?

Then we have:

"Euro area annual HICP inflation was 2.7% in February 2012, according to Eurostat’s flash estimate, slightly up from 2.6% in January. Looking ahead, inflation is now likely to stay above 2% in 2012, mainly owing to recent increases in energy prices, as well as recently announced increases in indirect taxes. On the basis of current futures prices for commodities, annual inflation rates should fall again to below 2% in early 2013. Looking further ahead, in an environment of modest growth in the euro area and well-anchored long-term inflation expectations, underlying price pressures should remain limited."

So: "Looking ahead, we are firmly committed to maintaining price stability in the euro area, in line with our mandate. To this end, the continued firm anchoring of inflation expectations – in line with our aim of maintaining inflation rates below, but close to, 2% over the medium term – is of the essence."

And again, one can ask: 2.6-2.7% currently and staying above 2% in 2012 - that is medium term or short term? And why would inflation de-accelerate if the growth is to pick up per forecasts in 2013? Why would commodities price inflation taper off if global growth and indeed Euro area growth are to stabilize and even improve?

Then, of course, there's that statement that 'underlying price pressures should remain limited'. Followed by: "The March 2012 ECB staff macroeconomic projections for the euro area foresee annual HICP inflation in a range between 2.1% and 2.7% in 2012 and between 0.9% and 2.3% in 2013. In comparison with the December 2011 Eurosystem staff macroeconomic projections, the ranges for HICP inflation have been shifted upwards, notably the range for 2012."

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