Faced with a mixed bag of evidence about recent economic developments, the European Central Bank left its key interest rates unchanged in April, in the wake of the 25 basis point increase in its main refinancing rate, to 2.5%, in March. GDP growth in the final quarter of 2005 was confirmed at 0.3%, down on the third quarter’s 0.6%, and the various monthly indicators of activity showed at best lacklustre growth at the beginning of 2006. However, survey-based data were pointing to buoyant confidence and economic sentiment, headline inflation was remaining stubbornly above 2%, there were signs of a feed-through from high oil prices and those of other commodities along the domestic price chain, and money and credit growth continued to balloon.
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