The next step for ECB

The European Central Bank (ECB) meeting accepted a 50 point lowering of the interest rate, they were deciding whether to lower by 75 or 50 points told by the ECB head Jean-Claude Trichet.

Jean-Claude Trichet also said the future outlook for price stability have been improved even though the risk is not comletely gone. Inflation will go down to 2% during th year 2009, as commodity prices, salaries and other prices will normalise.

He also said that the uncertainty from the finance sector is extremely high and the ECB will continue to supervise all changes very detailed. The economy in the EURO area has been weakened and that certain risks has been materilised. It is important that the ECB avoids policy mistakes and the "second hand effect".

The measures taken by the ECB must encourage confidence in the financial systems and prevent credit restrictions. There are several signs that the economic growth could be restricted due to the financial turmoil, protectionism and higher commodity prices. The inflation is high because of direct and indirect effects from the high commodity prices, which are now expected to fall and ECB thinks that the CPI will fall even more in the middle of 2009 as and effect of these changes.

There is a slower rate of lending to the households but companies can still get financing for long periods of time. It is important for governments to use the financial turmoil as a catalyst for continues structural changes.