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Last Updated: Wednesday, 28 February 2007, 13:01 GMT
More eurozone rate rises 'likely'
Euro notes
Brussels is forecasting 2.4% eurozone growth this year
Interest rates across the eurozone are likely to rise again next month and further increases are on the cards, a leading bank official has hinted.

Axel Weber, president of the German Bundesbank, said that despite six rises in the past 14 months, rates were still "relatively low" on a historical basis.

Inflation was a worry and "determined and timely action" was needed to tackle economic risks, Mr Weber added.

Rates currently stand at 3.5%, their highest level in five years.

'Optimistic view'

Most observers expect policymakers to raise the benchmark rate by another quarter-point to 3.75% when they meet next week.

With Europe's leading economies performing strongly, some analysts believe rates could hit 4% before the end of the year.

The economy will continue to develop favourably even without the help of monetary policy
Axel Weber, Bundesbank president

In a speech in Germany, Mr Weber - who sits on the European Central Bank's interest rate-setting committee - said the eurozone economy was on a "solid and stable" footing.

However, he added that inflationary risks were likely to rise in the medium term.

"We must therefore withdraw the stimulation that monetary policy is providing for the economy. The economy will continue to develop favourably, even without the help of monetary policy," he said.

No chances

Figures published on Wednesday actually showed a downward revision in January's eurozone inflation from 1.9% to 1.8%, below the ECB's 2% target.

Nevertheless, with unemployment levels falling in Germany and France and business confidence on an upward curve across the eurozone, experts believe policymakers do not want to take any chances with price stability.

"Their optimistic view about the economy is still correct," said Christoph Weil, an economist with Commerzbank.

"I think they will raise interest rates further in March and... in June."

Eurozone growth forecast raised
16 Feb 07 |  Business
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08 Feb 07 |  Business
ECB calls for inflation vigilance
20 Nov 06 |  Business

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