|
|
ECB 6 April Council Preview
NO RATE RISE LIKELY THURSDAY BUT 25 bp EXPECTED IN JUNE OR EVEN MAY, AND POSSIBLY 100 bp MORE, TO 3.75%, TO COME BY MID-2007
No rise in ECB interest rates expected Thursday, 6 April, but odds shorten on 25 bp increase to 3.75% in May and June still a strong possibility ( with odds, say 10%, 40%, 50%, respectively); Balance of evidence over past month has shifted further towards upside inflation risks and away from downside risks to growth but jury still out on underlying strength of growth; Signs of rising inflation expectations and possible feed-through of high oil and other commodity prices to non-energy domestic prices increasing risk of second-round effects; Accelerating monetary and credit growth and ever-increasing liquidity overhang will further stoke up ECB's inflation worries; Subsequent expected rate hikes could come sooner and more frequently than previously foreseen, possibly to 3.25% by end-2006 and 3.75% by mid-2007.