By Bruno Waterfield - 12th January 2006
Eurozone interest rates remain unchanged after a December rise, sustaining market expectations of another increase in early March.
The European Central Bank’s 17-strong governing council maintained positive economic growth forecasts and kept the main euro interest rate at 2.25 per cent.
ECB president Jean-Claude Trichet told journalists that market expectations of a further interest rate rise in March were well founded.
“Seen from our own perspective the message has been well taken as regards what is in the market for future decisions,” he said at a Frankfurt press conference.
December’s interest rate rise was criticised by some governments but Trichet stressed that global economic indicators and rising energy prices had vindicated the decision.
“The information which has become available since then supports the assessment that an adjustment of our very accommodative monetary policy stance was warranted,” he said.
“It remains essential to keep medium to long-term inflation expectations in the euro area solidly anchored at levels consistent with price stability.”
ECB projections envisage “sustained growth of economic activity” both in terms of exports, investment and consumer confidence.
But Trichet warned that risks remained – especially to prices increases driven by high world demand for oil.
“Risks to this outlook for economic growth continue to lie on the downside and relate to high and volatile oil prices, concerns about global imbalances and the level of consumer confidence in the euro area, although the latter is improving,” he said.
“The economic analysis suggests that some upward impact on… inflation will result from the indirect effects of recent oil price rises and already announced changes to administered prices and indirect taxes. It also indicates that risks to price stability over the medium term remain on the upside.”
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