European economy picks up
Economists expect the European Central Bank to raise interest rates soon as Europe’s economy picks up – just not at today’s monthly rate-setting meeting of the bank’s governing council.
The bank will likely hold off until March before hiking the key refinancing rate, at 2.25% since a quarter-point increase in December, many think.
Fully 43 of 48 economists polled by Dow Jones Newswires saw no change today, but 46 of 48 predicted a March increase of another quarter point.
Optimism about growth is running high in Europe, with German consumers the most upbeat in five years and business confidence in France up for the first time in four months.
The bank predicts that inflation – its chief concern – will remain above 2% this year because of stronger economic growth, high oil prices and worker demands for increased wages. With growth now strong enough to take the sour anti-inflation medicine of a rate increase, most observers feel the bank will act soon.
The 12-nation euro zone’s economy is forecast to grow 1.9% this year, up from 1.4% in 2005, the ECB has said.
