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Last Updated: Thursday, 2 November 2006, 12:45 GMT
Eurozone rates held steady by ECB
Euro notes
The ECB is expected to raise rates in December
The European Central Bank (ECB) has voted to keep eurozone interest rates on hold at 3.25% for November, a decision that was widely expected.

Analysts now expect the ECB will raise rates by one quarter of a percentage point in December, as it continues to keep a close eye on inflation.

Although eurozone inflation fell in October to 1.6%, the ECB has hinted further rate rises are needed.

ECB boss Jean-Claude Trichet said "strong vigilance" remained vital.

'Anchoring inflation'

"Acting in a firm and timely manner to contain risks to price stability remains essential to ensure that inflation expectations are kept solidly anchored," he said.

Despite last month's inflation fall, the ECB is concerned that lower oil costs could refuel upward price pressures.

It also sees soaring German and French business and consumer confidence as a further inflationary risk.

The ECB which last raised rates last month - by one-quarter of a percentage point - has set an inflation target of 2% or below.

December's expected one-quarter of a percentage point rise to 3.5% would be the sixth increase in eurozone rates during 2006.

UBS economist Stephane Deo said he expected the ECB to increase rates not just in December, but into the New Year.


SEE ALSO
Euro inflation continues to cool
31 Oct 06 |  Business
Eurozone rates increased to 3.25%
05 Oct 06 |  Business
Energy slide cools Euro inflation
15 Sep 06 |  Business
Inflation eases slightly in July
15 Aug 06 |  Business
ECB raises interest rates to 3%
03 Aug 06 |  Business

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