ECB inflation warning brings end to era of cheap money
Jim Armitage is the City editor of The Independent and London Evening Standard group of newspapers. He has been a reporter and editor for more than 20 years and was recently shortlisted for the Press Gazette financial journalist of the year and The Society of Editors financial journalist of the year awards. He contributes news, investigative reports and comment to the Independent titles plus a daily column in the Evening Standard.
Friday 09 March 2012
The European Central Bank has hinted the days of super-low interest rates and cheap money could be drawing to a close.
Mario Draghi, president of the ECB, said inflation would probably rise through the 2 per cent target this year "with upside risk prevailing" – a warning that further rises are in the pipeline.
He went on to reassure about the eurozone's economic recovery, saying: "The risk environment has improved enormously."
Markets leapt on the words as meaning, in the words of James Nixon, economist at Société Générale, "Draghi is certainly hawkish."
The ECB left interest rates on hold at 1 per cent and investors predict them to stay on hold there until well into 2013.
It was Mr Draghi's first warning on inflation for well over six months, exacerbating the impact of his words.
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