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ECB 2 November Council Preview
NO RATE RISE LIKELY THURSDAY BUT ODDS ON 25 bp HIKE TO 3 1/2% 'REFI' IN DECEMBER, WITH 4%+ STILL PLAUSIBLE BY END-2007.
·Economic data since last meeting reinforces expectation of 25 bp rate rise in December.
·Robust economic growth has been sustained and, despite oil price fall and sudden drop in 'headline' inflation in September, external and domestic cost worries remain.
·Further worsening of monetary picture adds to medium-term inflation worries.
·Markets see rate plateau at 3 3/4% in first half of 2007 but EZA still believes that, barring major surprises, further hikes beyond 4% are on the cards for 2007 H2.