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Last Updated: Thursday, 5 October 2006, 13:43 GMT 14:43 UK
Eurozone rates increased to 3.25%
Euro notes
The eurozone's leading economies are looking up
Interest rates across the eurozone have risen again by a quarter point to 3.25% as the European Central Bank (ECB) moves to keep inflation in check.

Policymakers have now raised rates five times since December, mindful that several of Europe's largest economies are picking up apace.

The ECB has vowed to remain "strongly vigilant" on price inflation but prices rose less than 2% annually last month.

UK interest rates remained on hold at 4.75% on Thursday.

Key language

Despite the rise, ECB President Jean-Claude Trichet said rates remained at "low levels" and that inflationary risks still remained.

But he refrained from using the word "vigilance" to describe the ECB's anti-inflationary outlook, language typically used when a further rate rise is in the offing.

We would question whether rates need to go any higher than 3.5% for some considerable time
Howard Archer, Global Insight

One economist said the ECB had given few clues about the direction of rates in 2007 but that a further rise this year was still on the cards.

"The ECB clearly remains minded to raise interest rates again before the end of the year," said Howard Archer, chief economist with Global Insight.

"But we would question whether rates need to go any higher than 3.5% for some considerable time. We suspect that eurozone growth will moderate over the coming months in reaction to slower global growth."

Many economists believe rates will hit 3.5% by the end of the year as the economic picture improves.

The French economy grew by 1.1% in the second quarter, its strongest growth in 20 years, while German output expanded 0.9%, the best performance in five years.

Eurozone inflation fell to 1.8% in September - below the ECB's 2% target - but experts expect inflation in leading economies such as France to be closer to 2.5% by the end of the year.





SEE ALSO
German business confidence steady
26 Sep 06 |  Business
Energy slide cools Euro inflation
15 Sep 06 |  Business
French growth 'best in 20 years'
22 Aug 06 |  Business

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