The European Central Bank on Thursday made good on a threat to hike its key interest rate for the first time in 13 months in a bid to tamp down inflation expectations.
The ECB announced it had boosted its key lending rate by 25 basis points, or a quarter of a percentage point, to 4.25%. Attention turns now to ECB President Jean-Claude Trichet's monthly news conference at 8:30 a.m. Eastern.
The move came after Trichet repeatedly sounded warnings that commodity-led inflation pressures raised the danger of feeding a wage-price spiral.
Markets currently see strong odds the ECB will hike rates twice more within a year, a scenario some economists see as unlikely given darkening growth prospects for the euro zone.
Trichet, however, is likely to maintain a hawkish tone in the news conference, said Juergen Michels, a European economist at Citigroup, underlining market expectations for further tightening of monetary policy.
The rate hike comes as the ECB and other central banks grapple with the monetary-policy dilemma posed by surging inflation pressures and a slowing economy.
Imapct ; Data is slightly positive for Euro region and will support Bullions and Meatls prcies in india as well.
Regards ,
Kamlesh Jogi
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