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ECB & office parties
by Tony Butcher
Issue 10
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The time for change has arrived in the Euro zone. The President of the European Central Bank (ECB), Mr Jean-Claude Trichet, has finally decided that risks to inflation are increasing and that a pre-emptive rate rise would ease some of the building pressure. This nominal one quarter of one percent increase will have a very negligible effect on economic activity but its more important effect is psychological.

It signals the ECB’s intent to maintain price stability by keeping inflation expectations under control. The recent oil price rise and increasing demand for credit were threatening to filter into the major economies of Europe in the form of second round inflationary effects. This would fuel higher wage demands by industrial unions, such as the forthcoming IG Metall negotiations in Germany .

The ECB has raised rates for the first time in around five years as Europe enters a new interest rate cycle. Mr Trichet has been quick to deny that this increase will be the start of a series of rate increases, a policy approach which has been favoured by the Federal Reserve in America. Instead, he is confident that the ECB will react when necessary to any risks to increasing inflationary effect. It is widely expected that another quarter or half point move will happen in the first quarter of 2006.

Well, that was the news of ‘interest’ for the month. In the City, we have been enjoying the Festive Fun mainly in the form of Chris tmas parties. It is an amusing time of the year as Managing Directors mingle with the post room and secretaries. We had our party in the first week of December and sadly it ended with very few embarrassments. An incident of someone giving a friend of mine some fifteen minutes of continual verbal abuse and levelling some dubious allegations in his general direction until it was pointed out that he was talking to the wrong person. I have to admit I did have a chuckle and wasn’t surprised to see him skulking to the exit.

One very fond memory of a Chris tmas Past was a journey home after some post-work drinks. We were on a sparsely packed train rolling out of Waterloo towards the homely lights of Surrey . My friend and I were swaying down the carriage full of the merriment our local boozer had to offer, when we passed a young lady who had obviously started her journey from Waterloo sitting comfortably in the upright seats offered by British Rail.

However, as we rocked down the line, the effect of the Martini Cocktails she had probably consumed through the evening had taken their toll and she had not only drifted off to sleep, but drifted off her seat. Now do you remember when you do that on your sofa? You slide down, but most of your clothes, through the wonder of friction, stay where they are. In the most delicate way I can, let me just say we knew exactly what was in her stockings that Chris tmas. My friend was an absolute gent and covered her modesty with a napkin from “Pret a Manger”, which I think has a touch of irony about it. Enjoy the holidays and have a Happy New Year.

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