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The European Central Bank’s hawkishness continued on Friday as its governor Jean-Claude Trichet again hinted strongly that it will raise interest rates next Month.
As expected, the ECB held the euro-zone’s refi interest rate at 4.0 percent on Thursday, but Trichet’s announcement that the bank remained “vigilent” points towards a rate rise next month.
The ECB governor reiterated this sentiment on French radio on Friday and added that “there is a big probability” that rates will be hiked to 4.25 percent, at least.
However, he stressed that the decision would be made in September, based on information available to the ECB at that time.
The bank’s main goal at this time 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.
Trichet shrugged off criticisms over the current strength of the euro, pointing to Europe’s economic growth as evidence that the ECB’s policies are working. He said policies were good for sustainable growth and job creation.
Meanwhile, figures released on Friday revealed that retail sales in the euro-zone experienced slow growth in June, despite a fall in unemployment and general economic growth.
Retail sales had fallen by 0.7 percent in May and only rose by 0.4 percent again in June. The year on year figure for may is a 0.1 percent rise in sales.
This modest rise in sales points to shaky consumer confidence and could be a factor in moderate inflation rates.
04:30
Posted on Aug-04-2007
