30 June 2004, 17:45  ECB's Liebsher sees inflation easing as oil falls

European Central Bank Governing Council Member Klaus Liebscher said on Wednesday euro zone inflation would ease as oil prices fall from recent highs, according to official transcripts of a briefing in parliament. Liebscher, who is governor of the Austrian National Bank, also told an Austrian parliament financial policy committee the latest economic data showed the euro zone recovery was under way. Liebscher reiterated the ECB forecast that euro zone inflation would fall below two percent in 2005. The annual rate was 2.4 percent in June after a two-year high in May of 2.5 percent. "Inflation will decline with a decrease in the oil price...but only if there are no 'second-round' effects," the transcript paraphrased Liebscher as saying.
Second-round effects refer to the potential impact on inflation if wages or prices are increased on account of higher oil prices. ECB policy makers have repeatedly urged companies and workers not to use a temporary spike in inflation on the back of higher oil prices to agree lavish wage settlements, saying this could lift inflation permanently to higher levels.///

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