ECB holds Interest Rates Steady at 4% on its August Meeting

As widely expected, on its August meeting, the European Central Bank left borrowing costs unchanged at 4%, a six-year high. However, Interest-rate futures show investors are betting the ECB will lift rates at least once more this year.

The implied yield on the December Euribor futures rose to 4.52 percent from 4.48 percent yesterday. The contract settles to the three-month interbank offered rate for the euro, which has averaged about 16 basis points above the ECB key rate since 1999. Asa result, the euro may extend the year's 3.5 percent advance against the dollar as the yield spread between two-year German and U.S. bonds narrowed this week to the least in 2 1/2 years., Bloomberg, ECB
8/2/2007 5:55:53 AM