After a year of orchestrating interest rate increases to a steady and predictable beat, the European Central Bank has struck some dissonant notes that make the timing of its next rate move much harder to interpret.
Gone is the established usage of language that built at an ever quickening pace from monitoring inflation risks closely, to monitoring very closely and then vigilance until the ECB delivered the bang of an interest rate hike. The sounds are getting more jumbled.
ECB President Jean-Claude Trichet at his news conference on Thursday said all the right things to flag the next rate hike for February - inflation risks are clearly to the upside, rates are still low, liquidity is ample, monetary conditions accommodative and the ECB will "monitor very closely" all price developments. Then he created discord.
Asked if the phrase "monitor very closely" held its usual meaning, namely that the timing of the next ECB rate hike is likely to be February, Trichet cut the reporter off. "That would be a wrong interpretation," Trichet said. The ECB reserves the possibility to act at any time, Trichet said. Later he added the central bank would be guided by economic data, its best judgement and deep analysis.