Rates held for Eurozone but hike in July signalled
INTEREST rates in the Eurozone were held at 1.25 per cent yesterday, yet central bank chief Jean-Claude Trichet signalled a move to raise rates next month.
The European Central Bank (ECB) head used the key code-words “strong vigilance” in his statement, indicating monetary tightening to come.
The euro initially rose on the comments before retreating, with analysts saying a hike in July had already been priced in. Persistent worries about debt problems in Greece and other peripheral Eurozone economies also dented sentiment.
“Potentially the economic situation in some of the peripheral countries is not going to get much better in the near-term, and that will err the market on the side of caution – of pricing less rather than more rate hikes,” said RBS rate strategist Simon Peck.