ECB sets interest rate at 3.75 percent
The European Central Bank lived up to expectations on Thursday when it lifted Eurozone interest rates by 25 basis points to 3.75 percent. Most analysts were sure that the rate would go up after the ECB’s president, Jean-Claude Trichet, said after last month’s meeting that the Bank would exercise “strong vigilance” in fighting inflation. Those words have come to be seen as Mr. Trichet’s code for “expect a rate hike next month” among analysts.
More rate increases are expected in the future as core inflation is likely to rise and wages go up. One German union is currently demanding wage hikes of 6.5 percent at the least. In addition, the money supply has continued to rise in the Eurozone. It was up by 9.8 percent in January over the same period last year and its growth increased faster in December and January than it has since early in 1990.
Probably playing into the decision from the ECB to raise rates was new data showing that the Eurozone economy grew by 0.9 percent in the last quarter of 2006 for full-year gross domestic product growth of 2.7 percent.
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