ECB interest rate hike no longer guaranteed
Last week, Jean Trichet, president of the European Central Bank (ECB), insinuated that investors could reasonably expect the ECB to begin raising interest rates, possibly as soon as December 1. While testifying before the European Parliament’s Committee on Economic and Monetary Affairs, however, he backtracked from his earlier comments, by stating that investors should not expect a “series of rate hikes.” While the exact meaning of his comments is debatable, it seems investors should no longer take monetary tightening for granted. If the ECB raises interest rates at all in the short term, it is likely to do so only once or twice in order to give the economies of the EU plenty of time to adapt to a rising interest rate environment. Meanwhile, currency traders are furious at Trichet for the excessive volatility he injected into forex markets.
