Monday July 3, 2006 - 11:01:15 GMT
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INVESTICA Ltd - www.investica.co.uk
ECB rate increase speculation
The Euro-zone data remained strong on Friday with the business climate index gaining strongly to 1.41 in June from 1.05 the previous month while the wider economic sentiment index also strengthened. According to the data released on Monday, the Euro-zone PMI index for the manufacturing index rose to a six-year high of 57.7 in June from 57.0 in May, maintaining the run of strong data see over the past month. The price indices were also strong and the rise in output prices will cause particular alarm within the ECB as it suggests that wider inflation pressures could be increasing.
The German index was particularly strong, possibly fuelled to some extent by World Cup confidence, while the French and Italian indices were slightly disappointing for the month.
With the June consumer inflation rate confirmed at 2.5%, the ECB will continue to take a tough stance on interest rates and the bank will consider that a further tightening is required to ensure medium-term price stability.
There will be further speculation that an ECB interest rate increase could be sanctioned this week, although an August move is more likely at this stage.
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