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ECB 8 February Council Preview
NO RATE RISE LIKELY THURSDAY. NEXT MOVE (25 bp TO 3 3/4%) PROBABLE 8 MAR., WITH 4% SEEN BY EZA FOR MID-2007 AND 4 1/4%-4 1/2% FOR END OF YEAR
·As tightening in labour markets and rapid monetary growth continue, upside risks to price stability over medium term increase; downside risks to growth broadly unchanged.
·So far, cost and price increases contained, so no call for ECB to quicken pace of monetary tightening, but 25 bp rate rise, as signalled by Trichet last month, expected 8 March.
·Markets now share EZA's long-held view (Sep06) that 4% likely this summer, but not yet fully taken on board our view that more still to come, with 4 1/4%-4 1/2% likely by end-year.