FRANKFURT -- The
European Central Bank
held its equivalent of the
fed funds rate
steady at 2.5% Thursday, but said its unofficial tightening bias toward raising interest rates in the coming months would remain as Europe's recovering economy continues to gather steam.
Speaking at a press conference following a meeting of the central bank's
, ECB President
said, "the bias we
previously discussed is still there in full force, but before we take action we need further evidence" that inflationary pressures need to be countered by a rate hike.
While the ECB's statements have become increasingly hawkish since the summer, it remains unclear whether Europe's monetary authorities will pull the trigger before the end of the year or wait until the first quarter of 2000, as many analysts had previously expected.
Before Thursday's meeting, market participants feared that recent statements by Duisenberg and other ECB officials signaled a rate hike that could come as early as this meeting. Duisenberg reiterated comments made in New York last week that he was less than pleased with the euro area's surging money supply growth and the region's "rather generous" liquidity situation. However, he noted that comments made by ECB's Vice President Christian Noyer, which had riled the markets, had unintentionally been made more hawkish as they were translated into English from French.
Still, Duisenberg made clear it was only a matter of time before the ECB raised rates and the central bankers were merely waiting for a reason to take action. "The rising trend of M3
money supply growth calls for great vigilance on the part of monetary policy
and, monetary and credit developments indicate that continuous close attention must be given to upward risks to price stability," he said.
Along with the concern that the ECB may have emphasized the robust M3 figures, recent data have also shown that Germany, the continent's largest economy and long a drag on eurozone growth, may soon increase the pressure for higher rates. German manufacturing orders for August rose 5.1% in the month and jumped a whopping 8.8% in the year, raising the likelihood that output for more than a third of the euro area will also surge in the coming months.
Outside the euro area, the
Bank of England
also decided to leave its benchmark interest rate unchanged at 5.25% Thursday. Britain's central bank raised rates by 25 basis points in September in a pre-emptive move against building price pressures. Continuing a global tightening trend, analysts expect the Bank of England will raise rates later in the year alongside the ECB and the