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European Central Bank seems set to raise rates
G Thomas Sims and David Wessel
Frankfurt, Nov 3: The European Central Bank appears set to raise interest rates for the first time since its launch in January. Among most ECB watchers, the only lingering concern is whether the central bank will lift the short-term rate by one-half percentage point, taking back all of the rate cut it implemented in April when global-economic weakness threatened European economies, or whether it will raise rates only a quarter of a percentage point. A survey by Dow Jones Newswires found that 26 of 29 commercial banks polled, or 90%, expect the ECB to raise rates after officials meet here tomorrow. A similar survey two weeks ago showed 57% thought the ECB would move this year. What has changed? Mainly the rhetoric from ECB officials and signs of a stronger economy combined with a desire to wipe out uncertainty about ECB intentions that have been eating at bond prices. In the past week, ECB President Wim Duisenberg said the ECB's inclination toward higher rates has increased. Otmar Issing, the influential executive board member and chief economist, recently said the economic conditions prompting the April rate cut have disappeared. Growth in the money supply among the 11 countries that have adopted the common currency, the euro, has been more rapid than the ECB's stated "reference range . The Wall Street Journal Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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