Whilst the chances of the Bank of England increasing interest rates is looking increasingly unlikely, the same cannot be said for the European Central Bank. Having become the first of the G4 Central Banks to raise interest rates in April, further rate rises in the coming months seem inevitable.
Whilst an immediate decision to raise rates further seems unlikely, there is a possibility that further gains could follow as early as June. Despite yesterday’s Retail Sales data showing considerable unexpected declines; the month on month figure fell 1.0% leading to year on year declines of 0.7%; inflation; evidenced through April gains in both CPI and PPI to 2.7% and 6.7% respectively; continues to rise. These factors combined could make a June rate rise possible.
Analysts will scrutinize Trichet’s later statement closely, with some already hinting that the wording will provide a good indication of when the rise is likely to follow; specifically, a reference to ‘strong vigilance’ could imply a June rate rise, whilst reference to ‘monitoring the situation very closely’ could imply that a July rate rise is more likely.
Details of the announcement will be identified here as they become available.
ECB announces no further change to the eurozone Interest Rate at this time. As referenced above, pay close attention to Trichet's speech later this afternoon for any indications that the rate rise may follow in June. Note that a June rate rise is now favoured by analysts.
ReplyDeleteAlso, note that; in his press conference; Jean-Claude Trichet advised that the ECB would be 'monitoring very closely' the economic situation. This would seem to imply that a rate rise in June is unlikely. Keep an eye on the Economic data releases from the eurozone in the coming month to see whether the situation changes.
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