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To: long-gone who wrote (16058)	8/18/1998 10:07:00 PM
From: goldsnow	Read Replies (1) \| Respond to of 116860

Buba-eurozone money supply growth accelerating 02:03 a.m. Aug 18, 1998 Eastern FRANKFURT, Aug 17 (Reuters) - The Bundesbank said on Tuesday that the German inflation outlook for the remainder of 1998 was favourable but added that money supply in euro member countries was accelerating. The Bundesbank also said that the economic recovery had continued briskly in eurozone countries since the beginning of 1998 as strengthening domestic demand offset a slight decline in export growth. ''Overall, the goal of price stability has largely been reached in the eurozone at present,'' the Bundesbank said in its August monthly report, noting that consumer price inflation in the eurozone was 1.4 percent. The Bundesbank said it would carefully monitor the monetary and real economic situation in the euro zone in coming months. ''The further development of the inflation outlook will also determine the interest rate at which the central bank interest rates of the individual EMU countries will converge.'' The report marked a reiteration of the Bundesbank's stance that it will pay closer attention to pan-European economic and monetary trends in setting monetary policy before it cedes its power to set interest rates to the European Central Bank from January 1, 1999. The Bundesbank said it had calculated two provisional aggregates for money supply in the eurozone, a broad aggregate called M3H and a narrower M1 aggregate, which showed that money supply growth in the eurozone had strengthened since the sdtart of 1998. M3H was up 5 1/2 percent in May after having grown 4 1/2 percent in the course of 1997, the Bundesbank said, adding that the development had varied from country to country. It said M3H had grown particularly strongly in Italy and Ireland, and had accelerated from modest growth in France. M1 growth had grown nine percent year-on-year in May compared with six percent in December 1997. Reduced interest rates and weak inflation appeared to have contributed to the M1 growth by reducing the opportunity cost of holding cash, the Bundesbank said. But the Bundesbank added that its own money supply aggregate M3, would remain an important orientation for German monetary policy up to the formal start of EMU. ''Measured in terms of gross domestic product Germany accounts for about a third of eurozone GDP, so that the inflation outlook here has a decisive impact on the development of prices in the entire currency area,'' the report said. The Bundesbank said German consumer price inflation had eased in 1998 due to the declining oil price and falling unit labour costs which contributed to the inflation rate slowing to just 0.9 percent in July. ''Even if the external economic effects are unlikely to persist to the same extent, the price outlook is favourable overall for the further course of the year,'' the Bundesbank said. It added that it sae no danger of deflation. Copyright 1998 Reuters Limited.