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Last Updated: Thursday, 12 April 2007, 13:55 GMT 14:55 UK
Eurozone rates on hold at 3.75%
Euro notes
Many expect the ECB to raise rates to 4% by the end of the year.
The European Central Bank has left key interest rates at 3.75%, indicating it may watch and wait over inflation.

The Frankfurt-based ECB said it would monitor the risks to price stability "very closely", avoiding the stronger word "vigilance".

Traders, who expected the decision, interpreted this to mean the next rate hike would come at the June policy meeting rather than in May.

The euro hit a record high against the dollar and yen ahead of the meeting.

'Hawkish'

"No surprises from what we have heard so far from Mr Trichet - the intention of the Governing Council seems to be to hike rates in June, not beforehand," commented Sandra Petcov, economist, Lehman Brothers.

Aurelio Maccario, an economist at Unicredit, reinforced this view arguing the ECB will maintain a hawkish stance over the coming months and will hike rates three times before the year end.

"The inflation outlook for this year is pretty much in line with ours. Prices growth is expected to decelerate until next summer and rise toward 2% by the year-end."

The euro was trading at 160.86 yen - an all-time high - and touched $1.3477 ahead of the ECB decision. It held within striking distance of those levels after the ECB President Jean-Claude Triche commented on the decision at the news conference.


SEE ALSO
More eurozone rate rises 'likely'
28 Feb 07 |  Business
Eurozone interest rate up to 3.5%
07 Dec 06 |  Business
ECB calls for inflation vigilance
20 Nov 06 |  Business
Euro inflation continues to cool
31 Oct 06 |  Business

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