ECB

Fed, ECB, Central Banks Cut Rates in Coordinated Move

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A security officer stands outside of the Federal Reserve building in Washington on Sept. 16, 2008. Photographer: Jay Mallin/Bloomberg News

Oct. 8 (Bloomberg) — The Federal Reserve, European Central Bank and four other central banks lowered interest rates in an unprecedented coordinated effort to ease the economic effects of the worst financial crisis since the Great Depression.

The Fed, ECB, Bank of England, Bank of Canada and Sweden’s Riksbank each cut their benchmark rates by half a percentage point. The Bank of Japan, which didn’t participate in the move, said it supported the action. Switzerland also took part. Separately, China’s central bank lowered its key one-year lending rate by 0.27 percentage point.

Today’s decision follows a global meltdown that sent U.S. stock indexes heading for their biggest annual decline since 1937; Japan’s benchmark today had the worst drop in two decades. Policy makers are also aiming to unfreeze credit markets after the premium on the three-month London interbank offered rate over the Fed’s main rate doubled in two weeks to a record.

Read moreFed, ECB, Central Banks Cut Rates in Coordinated Move

ECB Keeps Rate at 4.25% Even as Recession Looms

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Oct. 2 (Bloomberg) — The European Central Bank kept interest rates at a seven-year high today to curb inflation, even after the credit crunch forced governments to bail out banks and increased the likelihood of a recession.

ECB policy makers meeting in Frankfurt left the benchmark lending rate at 4.25 percent, as predicted by all 58 economists in a Bloomberg News survey. The bank will cut borrowing costs in February next year, another survey shows.

The financial crisis reached new heights in Europe this week as governments stepped in to help rescue five banks and credit costs soared to records. With the euro-region economy on the brink of a recession and retreating oil prices pushing down inflation, the ECB may have more room to lower rates.

Read moreECB Keeps Rate at 4.25% Even as Recession Looms

Fed Pumps Further $630 Billion Into Financial System

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Sept. 29 (Bloomberg) — The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression.

The Fed increased its existing currency swaps with foreign central banks to $620 billion from $290 billion to make more dollars available worldwide. The Term Auction Facility, the Fed’s emergency loan program, will expand to $450 billion from $150 billion. The European Central Bank, the Bank of England and the Bank of Japan are among the participating authorities.

The Fed’s expansion of liquidity, the biggest since credit markets seized up last year, comes as Congress prepares to vote on a $700 billion bailout for the financial industry. The crisis is reverberating through the global economy, forcing European governments to rescue four banks over the past two days alone.

Read moreFed Pumps Further $630 Billion Into Financial System

Fortis Gets EU11.2 Billion Rescue From Governments

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Sept. 29 (Bloomberg) — Fortis, the largest Belgian financial-services firm, received an 11.2 billion-euro ($16.3 billion) rescue from Belgium, the Netherlands and Luxembourg after investor confidence in the bank evaporated last week.

Belgium will buy 49 percent of Fortis’s Belgian banking unit for 4.7 billion euros, while the Netherlands will pay 4 billion euros for a similar stake in the Dutch banking business, the governments said in a statement late yesterday. Luxembourg will provide a 2.5 billion-euro loan convertible into 49 percent of Fortis’s banking division in that country.

Fortis is the largest European firm so far caught up in the global financial crisis that drove Lehman Brothers Holdings Inc. into bankruptcy two weeks ago and prompted U.S. President George W. Bush to seek a $700 billion bank rescue package. Fortis dropped 35 percent last week in Brussels trading on concern the company would struggle to replenish capital depleted by the 24.2 billion- euro takeover of ABN Amro Holding NV units and credit writedowns.

Read moreFortis Gets EU11.2 Billion Rescue From Governments

Belgian, Dutch Central Banks Seek Solution for Fortis

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Sept. 28 (Bloomberg) — Discussions between European, Dutch and Belgian officials on the future of Fortis, Belgium’s largest financial-services firm, carried into the evening as they sought a “solution” for the beleaguered bank.

Dutch central bank chief Nout Wellink and Finance Minister Wouter Bos went to Brussels for talks with the Belgian government and regulators. European Central Bank President Jean-Claude Trichet met with Belgian Prime Minister Yves Leterme and Finance Minister Didier Reynders today.

Fortis fell a record 20 percent in Brussels trading two days ago on concern the firm would struggle to raise the 8.3 billion euros ($12.1 billion) it’s seeking to bolster reserves. The bank said Sept. 26 its financial position is “solid,” and replaced interim Chief Executive Officer Herman Verwilst with Filip Dierckx, who heads the banking unit. Managers and government officials are considering a possible sale of part or all of the bank, the Wall Street Journal reported, citing unidentified people familiar with the situation.

“Fortis failed to restore confidence on its own and that can only be done now with the help of the regulatory institutions or rivals,” said Corne van Zeijl, a senior portfolio manager at SNS Asset Management in Den Bosch, the Netherlands, who oversees about $1.1 billion, including Fortis shares.

Fortis has fallen 71 percent this year in Brussels, the second-worst performance among the 69 companies on the Bloomberg Europe Banks and Financial Services Index, cutting the lender’s market capitalization to 12.2 billion euros ($17.8 billion).

Read moreBelgian, Dutch Central Banks Seek Solution for Fortis

Eurozone falls into recession

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The eurozone has fallen into recession, with industry particularly badly hit by the fall-out from global economic turmoil, results of a closely watched survey indicated on Tuesday.

Private sector output in the 15-country region contracted in September for the fourth consecutive month, according to eurozone purchasing managers’ indices. The pace of decline was the fastest since the aftermath of the September 2001 terrorist attacks in the US, with manufacturing faring worse than services.

The latest data indicated that, even if the crisis on Wall Street has yet to have a direct impact on eurozone economies, global economic storms have pushed the region into a technical recession – two quarters of contracting gross domestic product.

The eurozone composite purchasing managers’ index – covering services as well as manufacturing – fell from 48.2 in August to 47 this month. A figure below 50 is meant to indicate a contraction in activity.

Read moreEurozone falls into recession

Fed, ECB, Bank of Japan Lead Global Plan to Pump $247 Billion Into Markets

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Sept. 18 (Bloomberg) — The Federal Reserve almost quadrupled the amount of dollars central banks can auction around the world to $247 billion in a coordinated bid to ease the worst crisis facing financial markets since the 1920s.

The Fed increased the amount of dollars that the European Central Bank, the Bank of Japan and other counterparts can offer from $67 billion “to address the continued elevated pressures in U.S. dollar short-term funding markets.” The Bank of England, the Bank of Canada and the Swiss National Bank also participated.

Policy makers have struggled to revive confidence in markets this week as investors stockpiled money on concern more financial institutions would fail after the bankruptcy of Lehman Brothers Holdings Inc. and the U.S. government bailout of American International Group Inc. The cost to hedge against losses on U.S. government debt climbed to a record yesterday.

“There’s a complete lack of faith in the markets,” said Jim O’Neill, chief economist at Goldman Sachs Group Inc. in London. “There’s a lot of cash hoarding and people losing trust in banks, so the central banks are acting to relieve that. This might not be the last time they have to act.”

Read moreFed, ECB, Bank of Japan Lead Global Plan to Pump $247 Billion Into Markets

Recession forecast for Germany, Spain and UK

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Germany, the UK and Spain all face recessions this year, the European Commission forecast yesterday, dashing finally any remaining hopes that Europe would avoid a sharp economic downturn. France and Italy would fare little better, it said.

The steep downward revisions in growth forecasts by the European Union’s executive arm showed it had accepted that tumbling business and consumer confidence was hitting economic activity – even though the European economy had been “generally sound” prior to the credit crisis .

Joaquin Almunia, economics and monetary affairs commissioner, described the environment as “difficult and uncertain”. As well as financial turmoil and a near doubling of oil prices over the past year, significant housing market corrections in some countries were taking their toll, he said.

Read moreRecession forecast for Germany, Spain and UK

Scramble for cash as central banks dry up

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British banks soon could be scrambling for short-term funding once more amid reports that supplies from Threadneedle Street and from Frankfurt may be drying up.

The Bank of England explicitly ruled out extending its Special Liquidity Scheme (SLS), while the European Central Bank is reportedly considering tightening its lending criteria.

The two central banks have been huge suppliers of liquidity to British banks. The SLS is thought to have provided £50 billion or more, while the ECB has lent banks €467 billion (£378 billion) – much of it thought to have gone to UK institutions.

Read moreScramble for cash as central banks dry up

ECB May Keep Rates at 7-Year High as Recession Looms

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Sept. 1 (Bloomberg) — The European Central Bank will probably keep interest rates at a seven-year high this week, and may even threaten to raise them, at the risk of prolonging the economic slump.

All but one of 47 economists surveyed by Bloomberg News predict the Frankfurt-based central bank will leave the benchmark rate at 4.25 percent on Sept. 4 and only five expect a cut this year, even after the region’s economy contracted in the second quarter.

Read moreECB May Keep Rates at 7-Year High as Recession Looms

Wall Street Journal: New credit hurdle looms for banks

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U.S. and European banks, already burdened by losses and concerns about their financial health, face a new challenge: paying off hundreds of billions of dollars of debt coming due.

At issue are so-called floating-rate notes – securities used heavily by banks in 2006 to borrow money. A big chunk of those notes, which typically mature in two years, will come due over the next year or so, at a time when banks are struggling to raise fresh funds. That’s forcing banks to sell assets, compete heavily for deposits and issue expensive new debt.

The crunch will begin next month, when some $95 billion in floating-rate notes mature. J.P. Morgan Chase & Co. analyst Alex Roever estimates that financial institutions will have to pay off at least $787 billion in floating-rate notes and other medium-term obligations before the end of 2009. That’s about 43 percent more than they had to redeem in the previous 16 months.

The problem highlights how the pain of the credit crunch, now entering its second year, won’t end soon for banks or the broader economy. The Federal Deposit Insurance Corp. said on Tuesday that its list of “problem” banks at risk of failure had grown to 117 at the end of June, up from 90 at the end of March. FDIC Chairman Sheila Bair said her agency might have to borrow money from the Treasury Department to see it through an expected wave of bank failures. She said the borrowing could be needed to handle short-term cash-flow pressure brought on by reimbursements to depositors after bank failures.

Read moreWall Street Journal: New credit hurdle looms for banks

Beijing swells dollar reserves through stealth

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China has resorted to stealth intervention in the currency markets to amass US dollars, using indirect means to hold down the yuan and ease the pain for its struggling exporters as the global slowdown engulfs the economy.

A study by HSBC’s currency team in Asia has concluded that China’s central bank is in effect forcing commercial banks to build up large dollar reserves, using them as arms-length proxies in a renewed campaign of exchange rate intervention.

Beijing has raised the reserve requirement for banks five times since March, quickening the pace with two half-point rises in late June.

Read moreBeijing swells dollar reserves through stealth

The Big Sting Two

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By Bob Chapman

The plan for an economic takedown, the results of rampant market speculations, insiders picking up assets for pennies on the dollar, the coming hyperinflation, the credit crunch, collapse of the dollar carry trade, suppression of metals prices, American meddling in Georgia

Read moreThe Big Sting Two

The Disconnect Between Supply and Demand in Gold & Silver Markets

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There is a huge demand for both gold and silver right now in India and North America. North American shops are completely bare of silver.  Indian shops are empty of both silver and gold. Even the Indian banks don’t have any gold or silver.  The big western bullion banks, based in New York and London, control both the gold and silver trade.  Reports from India are that they are refusing to extend Indian bank lines of credit, forcing the small banks to deliver to clients, collect money, and pay down lines of credit, before being allowed to take delivery of another gold or silver shipment. This is very abnormal. Normally, if a banker’s bank knows that its customer-bank has firm orders, it would extend the smaller bank a bigger line of credit.  Not now.

By refusing to extend lines of credit, the big bullion banks are essentially rationing a very thin supply.  Most physical silver, for example, is being reserved for industrial and fabrication use, and investors are simply not able to get any, without waiting for months.  Investor oriented shops are bare, and the U.S. Mint has suspended coin production.  All available supply seems to be reserved for industrial users.  You cannot substitute paper claims for real silver, in industrial use, because paper doesn’t have the physical properties of silver.  So, it seems that all available supply is being diverted to industrial users, and, to a lesser extent, aside from the squeeze on lines of credit, also to jewelry fabricators.  But, investors are left out in the cold.  They can accept paper claims, or nothing.  The most interesting mistake that the manipulators have made is in not supplying the U.S. Mint, which has run out of silver, proving that there is a severe shortage.

Read moreThe Disconnect Between Supply and Demand in Gold & Silver Markets

Morgan Stanley has issued a major alert on the health of Spanish banks

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Morgan Stanley, the investment bank, has issued a major alert on the health of Spanish banks, warning that a replay of the ERM crisis in the early 1990s could wipe out the capital base of weak lenders exposed to the property crash.

Read moreMorgan Stanley has issued a major alert on the health of Spanish banks

Fed extends emergency loan program for Wall Street

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And because of this Wall Street is celebrating today, but not for long.
Before: Fed: No more bailouts, except Fannie Mae and Freddie Mac
And now the Fed wants to bailout Wall Street?
The taxpayer will pay for it all.
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WASHINGTON (AP) – The Federal Reserve said Wednesday it is extending its emergency borrowing program to Wall Street firms and is taking other steps to ease a severe credit crunch that has hobbled the national economy.

Read moreFed extends emergency loan program for Wall Street

Amber light flashing on U.S. dollar intervention

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So Inflation is really the greatest export of the US.
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LONDON (Reuters) – Three days before the last bout of coordinated central bank intervention to calm world currency markets, the International Monetary Fund’s top economist opined: “If not now, when?” Many experts are now asking the same.

Read moreAmber light flashing on U.S. dollar intervention

US: Total Crash of the Entire Financial System Expected, Say Experts

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Investors are fleeing from the U.S. stock market, Sending the Dow to Worst June Since Depression, looking for places to secure their wealth.

There is an unprecedented cash flow of ‘hot money’, which is usually defined as short-term global speculative funds moving among financial markets in search of the highest short-term return, moving into China:
Is China flooded with ‘hot money’ because of an expected meltdown in the U.S.?

Let’s further examine the prospects that we would experience a total crash of the entire financial system:

– Fortis Bank Predicts US Financial Market Meltdown Within Weeks

We have seen the Dow suffering it’s worst 1st half since ‘70 accompanied by a lot of bad news for the economy like:
– US: Big Trouble for General Motors, Crysler and Ford
– America’s Aviation System About To Collapse
– Starbucks to cut as many as 12,000 positions
And now the corporations are cheating you at the supermarkets: America’s Shrinking Groceries

The Dollar is being destroyed by the Federal Reserve, which has created in the last three years 4 Trillion Dollars of new money out of thin air: Ron Paul on Iran and Energy June 26, 2008

Ron Paul is further warning that: This coming crisis is bigger than the world has ever experienced
and that: We are at the beginning of a huge Dollar bubble.

The US Federal Reserve intentionally created inflation and that is why its credibility has fallen “below zero” and that is why Barclays warns of a financial storm as Federal Reserve’s credibility crumbles.

More dire warnings:
– RBS issues global stock and credit crash alert
– Morgan Stanley warns of ‘catastrophic event’ as ECB fights Federal Reserve
– Central bank body warns of Great Depression
– Credit crisis expands, hitting all kinds of consumer loans
– How Low Can The Dollar Go? Zero Value

Investors like Jim Rogers are telling us to “Avoid The Dollar At All Costs” and have told us that the Federal Reserve will fail and that Bernanke should be fired (alhough that isn’t possible because of his contract), because he has created the worst recession in the end and thats why he said: “Abolish the FED” on CNBC 2008.03.12.

The Fed is only doing good for the big corporations on Wall Street. If you would continuously come close to bankruptcy, because you have irresponsibly wasted your money, who will continuously give you billions of Dollars and bail you out, because you might fail? So I agree totally with Marc Faber: ‘Misleading’ Fed Should Let Banks Fail.

Well those corporations are said to be to “Big to Fail”, but they eventually will fail, because the entire system will fail and the Dollar is being destroyed in the process and so the people will end up with nothing, because their life savings are worthless paper. You are already paying the price for this policy, but maybe you haven’t looked at it that way:
The Price Of Food: 2007 – 2008
What inflation really is, is a taxation on monetary assets. And guess who is paying for all of that?

I just love this video. A must see:
The Stock Market and the Monetary System are on the verge of collapse!

Read moreUS: Total Crash of the Entire Financial System Expected, Say Experts

ECB raises key rate to 4.25%

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FRANKFURT: The European Central Bank, spooked by soaring prices for food and fuel, raised interest rates Thursday, joining several other central banks in battling a global eruption of inflation.

The quarter-point hike, which the bank had signaled last month, had little initial effect on markets, with the euro treading water against the dollar and stocks staying relatively steady. Central banks in Sweden and Norway also raised rates this week, citing inflation. On Thursday, Indonesia raised its key interest rate for the third time this year, while India raised its key lending rate twice last month.

The Federal Reserve in the United States, where short-term interest rates are only half of those in Europe, has so far declined to join them.

The European Central Bank’s decision deepens a recent divergence in monetary policy across the Atlantic, ending a long period when it tended to follow the course set by the Fed.

But the sharp rise in inflation has put Europe’s bank into a policy bind because it has been accompanied, in recent days, by evidence that the economy here is deteriorating much like that of the United States.

Manufacturing activity in the 15 countries that use the euro shrank in June for the first time in three years, according to a survey of European purchasing managers. In Spain and Ireland, where a collapse in housing prices has magnified the problems, there is a real risk of recession.

Still, the European Central Bank, hewing to its inflation-fighting mandate, pressed on with the expected increase, moving the benchmark rate to 4.25 percent from 4 percent. Among other things, it is intended as a warning to unions not to use higher inflation as a lever to demand hefty wage increases.
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Say goodbye to the Dollar and to Wall Street.
Got Gold and Silver? – The Infinite Unknown

Related articles and videos:
– Dow suffers worst 1st half since ‘70
– Fortis Bank Predicts US Financial Market Meltdown Within Weeks
– Barclays warns of a financial storm as Federal Reserve’s credibility crumbles
– Jim Rogers: Avoid The Dollar At All Costs
– Ron Paul on Iran and Energy June 26, 2008
– Marc Faber: ‘Misleading’ Fed Should Let Banks Fail

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It was not clear, before an afternoon news conference chaired by the bank’s president, Jean-Claude Trichet, whether the rate increase would be a one-time gesture or the start of a cycle of tighter monetary policy.

Several economists said they doubted the bank could tighten much further, given the parlous economic situation.

“The ECB is hiking at a time when confidence is plummeting,” said Thomas Mayer, the chief European economist at Deutsche Bank. “The question is, ‘what do you do when asset prices fall at the same time that consumer prices rise?’ The central bankers seem to have reached the end of the line.”

Read moreECB raises key rate to 4.25%

Europe may push the Fed to raise rates

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The European Central Bank is expected to boost a key rate Thursday in order to fight inflation. The move may cause a weaker dollar and force the Fed’s hand.

NEW YORK (CNNMoney.com) — The fireworks may come a day early for the financial markets if the European Central Bank, as expected, raises interest rates on Thursday.

If the ECB, Europe’s counterpart to the Federal Reserve, hikes rates, that could put even further pressure on the anemic dollar and send commodity prices even higher.

The ECB will announce its decision on interest rates early the morning of July 3 and will hold a press conference shortly thereafter to discuss the decision.

Members of the ECB, most notably its president Jean-Claude Trichet, have been talking loudly about inflation concerns in recent weeks and have hinted that a rate hike will take place at Thursday’s meeting.

If the ECB does raise rates by a quarter-of-a-percentage point, that would leave its benchmark short-term rate at 4.25%. By way of comparison, the Fed’s federal funds rate is just 2%.

Read moreEurope may push the Fed to raise rates

GLOBAL ECONOMY – Factories hit worldwide as commodity prices soar

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LONDON/TOKYO (Reuters) – Soaring commodity costs are denting manufacturing activity in Asia and Europe and the outlook looks bleak as new orders drop off in the face of rising prices, surveys showed on Tuesday.

Manufacturing activity in the euro zone contracted in June for the first time in three years while business confidence in Asia’s largest export markets is buckling and output has likely contracted further in the United States.

Purchasing managers indices showed manufacturing activity in the euro zone fell to 49.2 in June, China saw its index fall to a near three-year low of 52.0 while in Britain it contracted at its sharpest rate since December 2001.

The 50.0 mark separates growth from contraction. Factories worldwide have struggled in the face of soaring raw material and energy costs — oil hit over $143 a barrel on Monday.

Meanwhile, the Bank of Japan’s tankan corporate index of big manufacturers’ sentiment dropped to plus 5, from 11 in March, showing their mood has not been darker since 2003.

Read moreGLOBAL ECONOMY – Factories hit worldwide as commodity prices soar

The Dow-Crash, The Dollar, Gold, and WAR!

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The June 2008 Dow Crash
and the coming first strike attack on Iran
herald the end of dollar hegemony.

BREAK-DOW!

They say that pictures speak a thousand words, so let’s start this with a picture:

Today, the Dow crashed through its eight-year support level at 11,750. There isn’t much below now to keep it from dropping all the way back down to the 7,500-range. What that will do to American investor psychology and worse, consumer confidence, and therefore spending, and therefore the economy, is only too apparent.

The gold-attack on Monday obviously didn’t take. Gold recovered the following day and powered up by $26 the very next day to close in NY at $911. On Friday, gold confirmed its breakout, which means there will be little holding it back – just like there is now very little that’s holding the Dow up.

Unsurprisingly, the US war machinery is in full swing at this time. Troop and military asset movements into the Iranian theater are nearly complete, the Israelis have flown their practice-attack of 100-plus fighter jets over the Mediterranean, and Congress has again prostrated itself before its banking-guild rulers who want total government (and therefore banking) of all economic activity.

Congress did this by passing the FISA Amendments Act of 2008 to give retroactive immunity to telcoms spying for the government, and by proposing a resolution (the already infamous H. Con. Res. 362) by which Congress demands that Bush completely blockade Iran in order to force it to stop enriching uranium. This, naturally, is a perfect setup for unleashing the long-planned bombing campaign on Iran. Congressmen know that Iran will not accede to these international demands.

End result: We will probably get another war because of all this, just like we got one back in 2002-03 when the Dow plunged into the chasm this recently broken support level has bridged for these past eight years (see chart above).

The problem is that this time, it is a bipartisan gang of US war mongers in our Congress who all appear hell-bent on forcing Bush to attack Iran with a preemptive strike, possibly even an unprovoked nuclear first strike – something that human history so far has not had to deal with.

It is also something that will cause the US to forfeit any legitimate claims of world leadership for the remainder of that history.

The War Currency

Wars are rarely fought over national security issues, as political leaders often claim. At rock bottom, they are mostly fought over economic issues.

Iraq and Iran (if Congress and the administration get their way) are the only two countries the US has ever attacked preemptively. They are also the only two oil-producing countries that ever went off the petrodollar. The alleged nuclear ambitions of a terrorist-sponsoring country cannot be the real reason for the planned attack – because terrorist-sponsor North Korea was not only allowed to develop nuclear weapons unmolested, it was even allowed to test-launch a potentially nuclear-tipped ICBM at the US without any military repercussions whatsoever.

There goes the “national security” rationalization for this planned attack.

This fact exposes the attacks for what they really are. tools of US monetary policy. The dollar has no real value internationally, save for the fact that the now militarily enforced necessity for countries to buy dollars in order to buy oil creates artificial demand.

The euro’s existence threatens all of this, now. Oil countries have a dollar-alternative in the euro, and so does the rest of the world. The euro is designed to not be quite as inflationary as the dollar is and has been. This is done by virtue of the ECB’s exclusive mandate of “price stability”, another word for inflation fighting.

Yet Another War Currency

Read moreThe Dow-Crash, The Dollar, Gold, and WAR!

OPEC Leader Khelil Says Dollar Will Drive Oil to $170

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June 28 (Bloomberg) — OPEC President Chakib Khelil predicted that the price of oil will climb to $170 a barrel before the end of the year, citing the dollar’s decline and political conflicts.

“Oil prices are expected to reach $170 as demand for fuel is growing in the U.S. during the summer period and the dollar continues to weaken against the euro,” Khelil said today in a telephone interview. The leader of the Organization of Petroleum Exporting Countries also serves as Algeria’s oil minister.

Political pressure on Iran and the depreciation of the U.S. currency have caused a surge in oil prices, Khelil said. New York- traded crude has more than doubled in a year and touched a record $142.99 a barrel yesterday on the New York Mercantile Exchange.

OPEC ministers generally say that oil output is sufficient, even as Saudi Arabia, the biggest producer, pledged to pump an extra 200,000 barrels a day next month to calm the market. “The market is completely supplied,” Venezuelan Oil Minister Rafael Ramirez said yesterday. Libya announced possible production cuts, calling the market oversupplied.

The rising cost of crude is not linked to supply, Khelil said today. “There is more than enough oil in the market to meet the international demand,” added the OPEC president, who will take part June 30 in an international energy forum in Madrid.

Prices, which are up 38 percent this quarter, are heading for the biggest quarterly gain since the first three months of 1999, when oil traded between $11 and $17.

Declining Dollar

“The decisions made by the U.S. Federal Reserve and the European Central Bank helped the devaluation of the dollar, which pushed up oil prices,” Khelil said.

Read moreOPEC Leader Khelil Says Dollar Will Drive Oil to $170

The Economy Has Hit The Wall: Oil above $ 140, Consumer Confidence Falls, Retail Sales Slump

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June 27 (Bloomberg) — European confidence dropped more than economists forecast this month and retail sales plunged, signaling that economic growth is continuing to cool even as the European Central Bank prepares to lift interest rates to a seven-year high to tackle inflation.

An index measuring sentiment in the euro area fell to 94.9, the lowest since May 2005, from 97.6 the previous month, the European Commission in Brussels said today. Separate reports showed European retail sales plummeted, while inflation accelerated in Germany and Spain.

Stocks fell in Europe today as oil climbed to a record above $140 a barrel and Carrefour SA, Europe’s biggest retailer, scaled back its earnings forecast. With soaring food and energy prices boosting inflation, ECB President Jean-Claude Trichet has said the bank may raise the benchmark rate next week by a quarter point to 4.25 percent.

``The economy has hit the wall,” said Ken Wattret, senior economist at BNP Paribas SA in London. ECB officials “run the risk of tipping the euro area into a recession” as the inflation outlook increases the risk that the central bank “may need to go beyond one rate rise.”

Confidence among the manufacturing, construction and retail industries across the 15 nations that share the euro declined this month, as did consumer sentiment, according to today’s commission report.

The Bloomberg retail index, based on a survey of more than 1,000 executives compiled by Markit Economics, fell to 44 this month from 53.1 in May. A reading below 50 indicates contraction. Europe’s manufacturing and services industries also contracted this month.

Export Growth

The euro has increased 17 percent against the dollar in the last 12 months, threatening export growth, and was at $1.5770 today. The Dow Jones Stoxx 600 index fell 1.3 percent to 284.67 as of 11:29 a.m. in Brussels.

Separate figures today showed France’s economy expanded less than initially estimated in the first quarter as household spending, the driving force of growth, stagnated. U.K. first- quarter growth was revised lower today.

ECB council member Miguel Angel Fernandez Ordonez said today a July rate increase is not a certainty.

“Nothing is inevitable in life,” Ordonez told reporters in Rome today. “What we said was that the increase is not certain, but possible.”

Still, the ECB remains focused on consumer-price growth, according to ECB Executive Board member Juergen Stark. He said yesterday the bank sees its primary aim as being to “firmly anchor inflation expectations.”

16-Year High

Euro-area inflation reached a 16-year high of 3.7 percent in May. In Spain, inflation accelerated to 5.1 percent this month, the fastest on record, according to data today. Inflation in four German states also accelerated this month.

Oil prices have doubled in a year and Libyan National Oil Corp. Chairman Shokri Ghanem said yesterday that $150 a barrel may be “around the corner.”

Companies expect to raise prices more than previously anticipated to recover soaring costs, the commission report showed. A gauge of companies’ selling-price expectations rose to 18 in June from 16 in May, which compares with an average reading of 6 over the last 18 years. Consumers also expect prices to rise more sharply than they did last month.

The “worrying combination” of falling confidence and rising price expectations, “will add to fears of stagflation in the euro zone,” said Martin van Vliet, an economist at ING Group in Amsterdam.

`Remain Elevated’

“Inflation is likely to remain elevated for a longer period than we initially expected,” EU Monetary Affairs Commissioner Joaquin Almunia said in London today. It “should only begin to show a significant deceleration around the end of this year, although further possible rises in the price of oil and agricultural products cannot be ruled out.”

Read moreThe Economy Has Hit The Wall: Oil above $ 140, Consumer Confidence Falls, Retail Sales Slump