FRANKFURT: The European Central Bankleft all three key interest rates unchanged at its councilmeeting as expected as euro-area inflation remains tame despitesignals of accelerating growth.The ECB said its 17-member Governing Council had decided tohold its main refinancing rate at 2.5 percent, the marginallending rate at 3.5 percent and the deposit rate at 1.5 percent, reports Reuters. "There is no reason, neither from the price side nor fromthe money supply side, that the ECB should raise interestrates," said economist Stefan Bielmeier at Deutsche BankResearch after the ECB announcement.
NO RATE HIKE EXPECTED UNTIL EARLY 2000
None of 38 analysts polled by Reuters earlier this weekexpected a change in the ECB's main refinancing rate atThursday's twice-monthly meeting.
Most economists say a rate hike is highly unlikely until thefirst quarter of 2000.
Confirming the view that inflation in the euro-zone'slargest single economy remains under control for now, Germanconsumer and producer price data released on Thursday came outlower than expected.
"The ECB outlook for prices is confirmed by these numbers:Prices are rising somewhat in the euro area but will flatten outbelow the ECB's two percent inflation threshold," said StefanBergheim at Merrill Lynch in Frankfurt.
The moderate consumer price picture was complemented byGerman producer price data for August, which was also below mostexpectations. Producer prices in August rose 0.1 percentmonth-on-month and fell 0.7 percent on the year.
Economists said companies are finding it hard to pass priceincreases on to consumers and deregulation has sparked a roundof competitive price decreases in key sectors such astelecommunications.
FRENCH ECONOMY REVS UP
Seperately, French data revealed a jump in consumer spendingthis summer, suggesting 1999 GDP would hit the top end ofgovernment forecasts, adding to a raft of strong European datathat showed growth in the euro-zone picking up speed.
It was the latest in a series of reports this week whichshowed the twin engines of consumption and industrial outputfiring on all cylinders in the euro-zone, economists said.
"The weight of evidence is overwhelming that Europe is in aperiod of strong growth," said Kelly Tonkin, European economistat Lehman Brothers. On Tuesday, France reported a record trade surplus for Julywhile Germany's key business climate indicator the Ifo indexlept over forecasts to a year high of 95.3 in August compared to93.7 in July.
SPANISH GDP ON THE RISE
Also announced this week, Spanish GDP rose 3.6 percent inthe second quarter and Belgium's leading indicator -- thecentral bank survey of retail, construction and manufacturing --showed its strongest reading since the start of 1998.
"Smaller countries are continuing the momentum they had andlarger countries such as Germany which had been dragging theindex down will see a marked improvement in the third and fourthquarters," Tonkin said.
Still, inflation appears under control while money supplydata, which is expected to be released for the month of Augustearly next week, is also expected to stay out of the dangerzone, Deutsche Bank's Bielmeier said.
"Price increases are moderate and money supply growth in theeuro area is moderate," he said. "Raising interest rates wouldmake no sense."
The last time the ECB changed rates was on April 8, when itcut its refinancing rate, the bank's main policy tool, by 50basis points.