German Investor Confidence Falls as French Inflation increases.

German investor confidence has fallen this month, whilst inflation in France has risen to its highest level in 12 years as a time when the European Central Bank officials refuse to cut interest rates.

The ZEW Center for European Economic Research said that the index of German investor and analyst expectations had dropped to minus 40.7 from minus 32 in the previous month as the country has shown key signals of reduced economic growth, couple with French consumer prices increasing by an annual 3.5 percent last month.

ECB policy makers Yves Mersch and Juergen Stark indicated that this has brought some level of confusion, however they stipulated that they refused to follow the moves of both the U.S. Federal Reserve and the Bank of England by cutting interest rate in order to buffer the slowdown.

The ECB kept the six-year high rate of 4 percent last week.

With inflation at 3.5 percent in the Euro zone there is fear amongst policy makers, and has partially been the reason why interest rate have not been lowered.

This is also because policy makers seen to be far more worried about inflationary pressures than the fear of economic slowdown.

The general consensus amongst economists is that the ECB cannot be sure that keeping its benchmark interest rate stable will be enough to keep inflation away, as inflationary pressures have increased in the short term as prices in France have increased by 0.8 percent in one month.

In the meantime the IMF have reduced their prediction of Germany’s economic growth by 0.2 percent to 1.4 percent.

Story link: German Investor Confidence Falls as French Inflation increases.