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ECB 5 October Council Preview
25 bp RISE IN RATES SEEN THURS, plus 25 bp TO A 3 1/2 'REFI' RATE IN DEC,THEN FURTHER HIKES, EVEN TO 4 1/4% OR 4 1/2%, BY END-2007.
·Economic data since last meeting reinforces picture of robust GDP growth plus rising cost pressures and re-acceleration of M3 growth, sidelining 'headline' inflation drop to 1.8%.
·Balance of risks shifts slightly further to inflation upside rather than growth downside.
·25 bp 'refi' rate increase, to 3 1/4%, almost foregone conclusion for Thursday, 5 October.
·ECB looks on track for 3 1/2% 'refi' rate December and 3 3/4%/4.0% by mid-2007.
·Barring major surprises, slightly restrictive 4 1/4%- 4 1/2% quite plausible by end-2007.