The ECB considered raising its key interest rates by half a percentage point at its meeting in Madrid today, but the 'overwhelming majority' of the bank's governing council deemed a quarter-point hike more appropriate, ECB president Jean-Claude Trichet said today.
'The overwhelming majority of the governing council thought that a 25-basis point increase was appropriate,' Trichet told a news conference. 'But we did weigh the assets and liabilities of a 50-basis point rise.'
The European Central Bank chief said that additional rate hikes were on the cards in the future if the euro zone recovery continued to gather momentum. 'If our (recovery) scenario is confirmed, then further withdrawal of monetary accommodation is warranted,' Trichet said.
The ECB has notched up its benchmark 'refi' refinancing rate three times since December, each time by 0.25 points. With today's latest move, the refi rate now stands at 2.75%.
However, the ECB was not committed to moving rates again by a quarter of a percentage point every three months, Trichet insisted. 'We have no ex-ante pre-commitment' to such a regular rhythm of rate increases, he said.
Meanwhile, the European Central Bank said today that it was sticking to its 2006 euro zone growth forecast of 2.1%, but cutting the 2007 growth forecast to 1.8%.
Previously, the bank had been pencilling in euro zone growth of 2% for 2007, but has revised it downwards as a result of the anticipated negative economic effects of high oil prices, Trichet said.
The bank also revised upwards its forecast for inflation in the 12-country eurozone in 2006 to 2.3% from 2.2% previously.
At the same time, the ECB said it was sticking to its 2007 inflation forecast of 2.2%.
The ECB defines price stability as annual inflation rates of close to but just below 2%.
