ECB raises interest rates, more rises expected

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ECB raises interest rates, more rises expected

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Economists have been analysing the comments of European Central Bank President Jean Claude-Trichet in the wake of the latest euro zone interest rate hike.

Explaining it, Trichet described the new rate as accommodating, which some analysts believe signals more hikes to come, with 4% likely by June.

The Bank’s President said: “At today’s meeting, we decided to raise the key ECB interest rates by 25 basis points. This decision was taken in view of the upside risks to price stability.”

He added: “After today’s increase, given the favourable economic environment, our monetary policy continues to be on the accommodative side with the key ECB interest rates moderate, money and credit growth vigorous.”

At 3.75%, the ECB rate is said by economists to be roughly at a neutral level – that is one that neither stimulates growth nor spurs inflation.

Trichet said the ECB will continue to monitor all inflation risks “very closely.” It is concerned that worker’s demands for more pay, as a result of record company sales and profits, will reignite inflation.

The ECB has also raised its economic growth forecast for this year to about 2.5% from its previous prediction of around 2.2%.

In response to Trichet’s remarks, the euro fell against the dollar and the yen.