In Europe however growth remains soft and contained inflation

For the 20th consecutive month, the European Central Bank (ECB) officiated yesterday for the maintenance of 2 of its main refinancing rate. This choice in contrast with the decision taken the previous day by the Federal Reserve us meet for the sixth time to a quarter of a point its own interest rate to 2.5, suggesting further monetary tightening at the next meetings of its monetary policy Committee (see also page 31).

Share and across the Atlantic, economies do not offer the same face. In the US, growth is sustained and inflationary risks are even more important that the budget deficit creates demand. In Europe, however, growth remains soft and contained inflation. "Our assessment on the stability of prices in the medium term is unchanged," since the previous meeting of the Board of Governors, stressed yesterday with Jean-Claude Trichet, President of the ECB. "The Central Bank sees no sign of underlying inflationary pressures in the euro area", despite the still high level of oil prices, he added, noting: "We expect that inflation in the zone euro or less in January, perhaps very inferior." He acknowledged that "wage increases are remained moderate in the last quarters" (in the third quarter of 2004, real wages have even declined) and that it did not accelerate in the coming months, "in view of moderate economic growth and weak labour markets".

According to the Institute of emission, inflation should return in 2005 under the 2 threshold, the maximum that it is set. The Bank remains vigilant, because "the inflationary tension risks in the medium term remain". It shows in particular "concerned" about the "excess liquidity" in the euro area. Referring to the growth of the M3 money supply, Jean-Claude Trichet explained that "there in the eurozone more liquidity than necessary to finance non-inflationary growth".

On the growth front, Jean-Claude Trichet concluded that it remained "moderate in euro area", suggesting that it had not yet reached a sufficient pace to tighten policy. Early indicators suggest that after a second half of 2004 rather disappointing in terms of growth, confidence is strengthening, but optimism is not shared by all the countries of the euro area.

"Change of tone."

According to Florence Beranger of Ixis-CIB, the speech of the President of the European Central Bank "does Announces no movement in the short term." We believe that the deceleration of activity and prices in the coming months, combined with the appreciation of the euro, will lead to a change in tone of the ECB and a relaxation of monetary policy in the second quarter of 2005.

In the meantime, the growing gap between European and American interest rates arranges rather the Affairs of the euro area. By increasing the return on investments in the United States, he argued the dollar and relieves Ricochet European exporters, who have for long months of an overvalued euro. In this connection, the President of the ECB reiterated yesterday the need for a reassessment of the Chinese currency, on the eve of the G7 Finance meeting in London. In this respect, Jean-Claude Trichet, finally, reiterated his warning against brutal variation of the euro against the dollar, even if the rate has stabilised since three weeks around 1.30 dollar.