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The European Central Bank sent out further signals on Tuesday that it will raise its key refi interest rate next month.
Marko Kranjec, a Council member of the European Central Bank and president of the Central Bank of Slovenia, reiterated recent comments from the bank that it is exercising strong vigilence in an interview with Financial Times Deutschland.
This is widely understood to mean that an interest rate rise from the present rate of 4 percent is imminent. However, Kranjec stressed that no decision will be made until the ECB meets in September.
He also warned that the current subprime mortgage crisis in the United States could have a negative impact on the euro-zone economy, particularly on the recovery of private consumer demand.
He said that “there is a good chance” that strong consumer demand could bolster economic growth in the months ahead, depending on the financial markets.
He also expressed a desire to see markets “calm down”.
On Friday, ECB governor Jean-Claude Trichet hinted strongly that the bank will hike interest rates next month.
He said that “there is a big probability” that rates will be hiked to 4.25 percent.
The bank’s main goal is to keep inflation in check and it seems to be taking a cautious approach as inflation is currently under its goal of about 2 percent.
15:03
Posted on Aug-08-2007
