EUROZONE interest rates were kept at 1.25 per cent yesterday with central bank president Jean-Claude Trichet suggesting that fewer hikes are on the horizon than many analysts were expecting.
Trichet declined to use the term “vigilance” in his statement, the codeword understood to indicate imminent monetary tightening.
“We will continue to monitor very closely all developments with respect to upside risks to price stability,” Trichet said instead.
“This implies, on the basis of precedent, that there will not be a rate hike in June, contrary to the increase in speculation, and the shift in market pricing, in recent days.” commented Ken Wattret of BNP Paribas.
Euro government bond and interest rate futures rallied on the back of the statement, which was less hawkish than expected.
Bund futures reversed earlier losses, while Euribor futures, a market barometer of Eurozone interest rate expectations, also rebounded.