ECB holds rates at 3%
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January 5, 2000: 9:40 a.m. ET
But economists expect rates to rise over the next few months
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LONDON (CNNfn) - The European Central Bank kept key interest rates unchanged in the 11-nation economic bloc Wednesday as expected, but economists expect a rate rise later this quarter.
At a press conference following the rate decision, ECB president Wim Duisenberg accepted that inflation would rise over the coming months, but appeared relatively unconcerned that price pressures are building too fast. He warned however, that rising prices must not feed through into excessive wage rises.
In December the annual rate of inflation in Europe hit 1.6 percent, up from 1.4 percent, approaching the central bank's 2 percent target rate. In its short lifespan the ECB has raised rates only once, in November, when rates rose half a percentage point to 3.0 percent.
Economists found few clues to the direction of future rates from Duisenberg’s comments , but pointed out that data continue to suggest a recovery in previously sluggish European economies.
Adam Cole, European economist at HSBC Securities, predicted the ECB’s key short-term rate would rise by at least a quarter of a percentage point from its current 3.0 percent level by the end of March.
German unemployment data released earlier Wednesday showed a sharp drop of 68,000 in December over November, highlighting the expected revival of the world's third-largest economy.
The euro has staged a mini-revival in recent days as signs of economic recovery have spread. The one-year-old European currency hit $1.04 Wednesday, its highest level in seven weeks.
The ECB brought forward its rate decision by a day because public holidays in some European countries on Thursday Jan. 6 meant it couldn’t hold its regular meeting in its usual Thursday slot.
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European Central Bank
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