Foros de la Plataforma por una Vivienda Digna

[nene]

European Central Bank President Jean- Claude Trichet said more interest rate increases may be ``warranted'' after the bank raised borrowing costs for the fourth time in eight months.

``We will continue to monitor very closely all developments so as to ensure risks to price stability do not materialize,'' Trichet told reporters in Frankfurt.

The ECB's 18-member rate-setting governing council today raised the benchmark interest rate a quarter point to 3 percent, as predicted by every economist surveyed by Bloomberg News. The increase marked an acceleration in the pace of shifts to every two months from quarterly as faster economic growth and near- record oil prices spur inflation.

Inflation has stayed above the bank's limit of 2 percent in each of the past 18 months and money-supply growth, which the bank uses to gauge future price risks, is close to a three-year high. At the same time, oil prices are still near the record $78.40 they reached on July 14 and the economy is on course for its strongest expansion in six years.

Investors expect the ECB to raise the main rate to at least 3.25 percent by December, futures trading shows. The yield on the three-month futures contract for December traded at 3.59 percent after the ECB announced its decision. The contracts settle to the three-month inter-bank offered rate for the euro, which has averaged 15 basis points more than the ECB's key rate since 1999.

Global Rates

Central banks around the world are raising borrowing costs to rein in inflation. In the U.K., the Bank of England today unexpectedly lifted its key rate to 4.75 percent.

The U.S. Federal Reserve on June 29 increased its benchmark rate for a 17th time, to 5.25 percent from 5 percent. The Bank of Japan on July 14 ended its near-zero rate policy and Australia's central bank yesterday raised its benchmark interest rate to a 5 1/2-year high of 6 percent.

The International Monetary Fund this week said the euro region economy ``remains fragile'' and forecast growth to slow to 1.8 percent in 2007 from 2.1 percent this year. Non- manufacturing companies, the biggest sector of the economy, expanded at a slower-than-expected rate in July, an industry survey showed today.

``The ECB will probably seek to get to a neutral level quite quickly because it knows that in 2007 it won't be able to raise rates,'' said Eric Chaney, chief European economist at Morgan Stanley in London, who last week said a recession was possible next year.

The ECB will hold its next meeting on interest rates on Aug. 31 in Frankfurt.



To contact the reporter on this story:
Simon Kennedy in Paris at skennedy4@bloomberg.net
Simone Meier in Frankfurt at smeier@bloomberg.net.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a4ZiLNzCwEF0