The Gist: The ECB may raise rates next month, if the data warants it, partially because of the oil price shock brought on by Middle East instability.
ECB President Jean Claude Trichet just said the that the central bank may raise interest rates as soon as next month.
“It is possible. It is not certain,” he said. It all depends on the data between now and then. “We are never precommitted,” he says. He refused to be specific as to how big the rate hike might be, but says don’t expect a big one.
He’s called the oil price movement a “shock,” with geopolitical events the driver. Trichet says we need to avoid “second round effects” from this shock. He has acknowledged that geopolitical events are a key driver in this.
While we expected hawkish comments today, these are a bit stronger than anticipated.
The euro is spiking on the news.
Trichet is also said there are still labour problems within the region, where high employment exists. That’s true in countries like Spain, Portugal, and Ireland, but not in the region’s core.
We’re following his speech live here.