The ECB will probably raise interest rates in September


The European Central Bank confirmed in a statement that its monetary policy stance had not changed from earlier in the month. The ECB indicated it may still raise interest rates in September and announced an extra 40 billion euros to ease lending between commercial banks.

The Frankfurt-based bank responded to speculation that it may hold off raising interest rates on Sept. 6 by saying it's sticking to the policy stance expressed by President Jean-Claude Trichet on Aug. 2. At the time, Trichet pledged to show ``strong vigilance'' on inflation, a phrase he has used to signal each of the eight rate increases since late 2005.
The implied rate on the September interest-rate futures contract rose to 4.49 percent at 7:23 p.m. in Frankfurt from 4.40 percent yesterday. The rate on the December contract increased to 4.38 percent from 4.24 percent.


The ECB is concerned that the fastest pace of economic growth since 2000 is giving companies room to raise prices and give in to worker demands for higher pay. In June, the ECB said inflation may average 2 percent this year and next, just above its limit. The economy of the 13 nations sharing the euro may expand about 2.6 percent this year and 2.3 percent in 2008, the ECB said in June. Europe's economy grew 2.7 percent in 2006.


TradingEconomics.com, Bloomberg
8/24/2007 6:21:50 AM