ECB rate Cut???

Views months ago ECB would cut rates before the end of the year but lately views have changed due to the rapid rise in consumer prices driven by energy and food.
The ECB rate increase now expected within the next 12 months because of rising inflation could strengthen the motivation to engage early in interesting investments before financing costs rise.
Expectations that the European Central Bank (ECB) will raise interest rates to fight inflation will encourage property investment before debt becomes more expensive.

Inflation is the biggest threat to economic growth at the moment,'' said Holger Schmieding, chief European economist at Bank of America Corp. in London. ``Whatever rate-cut hopes investors might have had, they were derailed by the new spike in oil prices.''

The bank, which aims to keep inflation just below 2 percent, celebrates its 10th anniversary today in the knowledge it will fail to achieve its goal for a ninth successive year. A surge in oil to a record $135 a barrel pushed inflation to 3.6 percent in May, the fastest the ECB has faced since its inception on June 1, 1998. At the same time, keeping interest rates higher for longer may exacerbate the economic slowdown.

Trichet has said that the ECB, charged with protecting the euro against the ravages of inflation, only narrowly missed its goal during its first 10 years despite several ``price shocks,'' and has succeeded in keeping inflation expectations in check.