Forex News – ECB expected to raise rates next week

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All eyes will soon be focused on next Thursday’s meeting of the European Central Bank with the hopes of an announcement of a rate hike.

This morning, Eurostat released data on consumer prices for the Eurozone which increased in June compared to June of 2010. Prices were 2.7 % higher but the forecast were for a figure of 2.8%.

The Central Bank said that its goal is to maintain below the 2% target rate and announced today that June’s inflation rate has remained well below that.

The CPI data has given optimism that a rate hike is due. Last April, the ECB raised the benchmark rate by 25 basis points to 1.25% for the first time in two years.

“It is of paramount importance that the current rise in inflation does not give rise to broad-based inflationary pressure,” ECB President Jean-Claude Trichet told the European Parliament’s economic and monetary affairs committee just before the figures were released.

“The current monetary policy is accommodative and … as I said we are in a state of strong vigilance,” he said.

The words “strong vigilance” are well known to the markets to be code for “rate hike”.

In response to this, the Euro was lifted to a three-week high against the Dollar this morning and will likely be supported until the actual rate announcement on July 7th.