ECB keeps interest rate at 1.25pc but signals change soon
The European Central Bank this afternoon signalled that it intends to raise interest rates next month.
Speaking in Frankfurt, ECB president Jean-Claude Trichet said 'strong vigilance' was needed in relation to inflation. Questioned by reporters after his opening statement, the ECB chief said the bank was 'in a mode where we might increase interest rates next month'.
However, he said the ECB was not signalling 'any particular pace' on future interest rate moves. The bank decided to keep its main interest rate unchanged at 1.25pc.
It had been expected that the ECB would follow up April's first interest rate rise in nearly three years with another quarter-point rise in July.
Many economists believe there will be at least two more increases this year as the ECB tries to bring inflation back towards target. Inflation in the euro zone is currently running at 2.7pc - above the bank's goal of just under 2pc.
Mr Trichet also said that ECB forecasters had raised their forecast for euro zone inflation this year to 2.6pc from 2.3pc, and that they had increased their growth forecast from 1.7pc to 1.9pc.