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To: pater tenebrarum who wrote (10008)	8/10/2000 1:07:47 PM
From: UnBelievable	Read Replies (1) \| Respond to of 436258

I'll See You that Yen, and Raise You a Euro ECB: Recent Euro Drop Reinforces Inflationary Concerns DJ ECB: Midterm Upward Price Stability Risks Still Prevail DJ ECB: "Incipient" Signs Higher PPI Pressuring CPI DJ ECB: M3 Still Shows Euro-Zone Liquidity Remains Ample DJ ECB: Euro-Zone CPI Seen Higher Than Forecast In Next Mos *DJ ECB:Q2 Euro-Zone Econ Activity Progressed At Robust Pace ECB Watch:Hawkish Tone Boosts Post-Recess Rate Hike Odds By Chikako Mogi Of DOW JONES NEWSWIRES FRANKFURT (Dow Jones)--A day after the euro hit an 11-week low against the dollar, the European Central Bank Thursday warned that the single currency's renewed depreciation is aggravating inflation risks. In its latest monthly report, the ECB said "the recent decline in the exchange rate of the euro has reinforced concerns of possible future inflationary consequences, particularly in a phase of strong economic growth." After reaching $0.97 June 19, the euro slipped steadily and fell below $0.8970 Wednesday, a touch above its all-time low of $0.8845. The report in effect substitutes for a monthly press conference by ECB President Wim Duisenberg, which, originally set for Aug. 3, was canceled. And it's the first public comment in a couple of weeks from the ECB about the euro's latest development. The euro has lost around 2.6% since the ECB's last press conference and monthly report released in July. The ECB stepped up its hawkish tone in the August report and confirmed a widely held market view the central bank is poised to raise key short-term rates by at least 25 basis points at one of the next two meetings, Aug. 31 or Sept. 14. Both pillars of its strategy indicate "upward risks to price stability in the medium term continue to prevail," the ECB said. The ECB looks at money supply and a range of economic data to gauge the inflation trend. A slowdown in money supply growth in June - for the third consecutive month - isn't as comforting as the figures suggested. It was caused by a significant moderation in the expansion of overnight deposits, the ECB said. "It is important, however, that such short-term variations in M3 growth should not be overemphasized, as they might be affected by temporary factors," the ECB said, adding: "On the whole, liquidity in the euro area remains ample." M3 growth is still well above the 4.5% reference value, and the deviation has lasted for a protracted period of time, it said. The ECB remains highly wary of inflation pressures, which show no sign of abating. The euro-zone consumer price index for June spiked to 2.4% from 1.9% in May, far exceeding the ECB's self-imposed ceiling of 2%. The ECB indicated it doesn't yet foresee any significant change in this rising trend. While the June CPI rise was primarily caused by the pronounced increase in oil prices during the second quarter, and these short-term movements shouldn't be overemphasized, the ECB nevertheless said "cost and price developments in the euro area need to be carefully monitored." The ECB is concerned, with good reason, that indirect and second round effects could emerge and make upward price pressures more persistent. There are "incipient signs" of a pass-through to consumer goods prices reflected in some components of the producer price index, the ECB said. The consumer goods component of the PPI has risen to over 1% in recent months, from 0.5% at the end of 1999, the central bank said. Strong economic activity in the euro area continues to add to inflation risks. The ECB said that in the second quarter, the region's economy progressed at a "robust pace." Growth prospects remain bright, supported by both domestic and external factors. These developments come against the backdrop of past oil price increases and the accumulated depreciation of the euro since its launch 18 months ago. This has led the ECB to note, "the path of year-on-year consumer price inflation over the coming months could be somewhat higher than was generally anticipated." The harmonized index of consumer prices for the euro area will be released mid-August and euro-zone M3 will be published later this month. These, along with the euro's development, are key in determining the timing and size of the ECB's next rate hike. -By Chikako Mogi, Dow Jones Newswires; 49-69-29725-500; chikako.mogi@dowjones.com