The European Central Bank meets on Thursday, and if recent comments by key bank officials are any guide, no interest rate cut from the current 4.75 percent level is expected. The ECB's key monetary policy goal is to keep inflation under control. With EMU consumer prices running above the 2 percent target and M3 money supply growth over its 4.5 percent target, inflation worries are expected to outweigh slow growth worries.
Key policy making indicators in Britain will be released this week along with the Bank of England's quarterly inflation report. The report gives insight into board members' thinking and is studied closely for clues to future policy. With the spring general election fast approaching, the Bank will be in a similar position that the Federal Reserve was in immediately before the U.S. election. Further interest rate moves could be hampered by the run up to the British general election.
Earnings continue to disappoint on both sides of the Atlantic. The 180 degree swing in profit outlooks continues to amaze. Until the last few months, earnings forecasts seemed to be overly optimistic. Whether current earnings forecasts are realistic or overly pessimistic remains to be seen. Are companies trying to surprise analysts on the upside?
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The Bottom Line Looking Ahead
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