Euro rates appear set to rise on Dec 1

The European Central Bank President Jean-Claude Trichet gave his biggest hint yet on Monday that euro-area interest rates are likely to rise at the next meeting on December 1.

After the regular meeting of central bank chiefs of the G10 world’s most wealthy countries, Trichet said “We need to solidly anchor inflationary expectations. … We have to remain credible,” Reuters reported.

The ECB’s main rate on refinancing operations, currently at 2% (125 basis points below the equivalent in Cyprus) has been set at that level for over two years but inflation has surpassed the upper target of 2% for almost ten months.

The “flash estimate” for eurozone inflation in October was 2.5%, while underlying inflation is about 1.5%.

Business confidence indicators and rising manufacturing output also suggest that a small rate rise could be absorbed by the market without too much damage.

However, eurozone ministers, concerned about weaker than expected retail sales figures, are also concerned that a rate rise may come too early.

Trichet said last week that the bank decision-makers “stand ready to move at any time”.