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| Version 0 | Version 1 |
|---|---|
| Euro interest rate likely to rise | Euro interest rate likely to rise |
| (about 5 hours later) | |
| The European Central Bank (ECB) is expected to raise interest rates from 4.0% to 4.25% in an attempt to control inflation, which is at record levels. | The European Central Bank (ECB) is expected to raise interest rates from 4.0% to 4.25% in an attempt to control inflation, which is at record levels. |
| The decision will be announced at 1145 GMT on Thursday and an increase would be the first for a year. | The decision will be announced at 1145 GMT on Thursday and an increase would be the first for a year. |
| But there have been many objections to a rate rise, in particular from French President Nicolas Sarkozy. | But there have been many objections to a rate rise, in particular from French President Nicolas Sarkozy. |
| Critics have argued that the causes of inflation - rising global oil and food prices - would be unaffected. | Critics have argued that the causes of inflation - rising global oil and food prices - would be unaffected. |
| Rate hints | Rate hints |
| Political pressure is unlikely to sway ECB President Jean-Claude Trichet, who said in comments to appear in Thursday's Die Welt newspaper that decisive action is needed, to avoid the risk, "that inflation could explode". | Political pressure is unlikely to sway ECB President Jean-Claude Trichet, who said in comments to appear in Thursday's Die Welt newspaper that decisive action is needed, to avoid the risk, "that inflation could explode". |
| Figures at the beginning of the week showed that inflation in the eurozone had hit an annualised rate of 4.0%, which was well above the ECB's target of 2.0% and also the highest since official records began in 1996. | Figures at the beginning of the week showed that inflation in the eurozone had hit an annualised rate of 4.0%, which was well above the ECB's target of 2.0% and also the highest since official records began in 1996. |
| Mr Trichet hinted after the last ECB meeting that there could be a rise in July. | Mr Trichet hinted after the last ECB meeting that there could be a rise in July. |
| "After having carefully examined the situation, we could decide to move our rates [by] a small amount in our next meeting in order to secure the solid anchoring of inflation expectations, taking into account the situation," he said. | "After having carefully examined the situation, we could decide to move our rates [by] a small amount in our next meeting in order to secure the solid anchoring of inflation expectations, taking into account the situation," he said. |
| "I don't say it's certain. I say it's possible." | "I don't say it's certain. I say it's possible." |
| Oil prices | Oil prices |
| Dr Chakib Khelil, president of the oil producers' group Opec told the BBC on Wednesday that oil prices could rise further if eurozone interest rates are raised. | Dr Chakib Khelil, president of the oil producers' group Opec told the BBC on Wednesday that oil prices could rise further if eurozone interest rates are raised. |
| European interest rates rising makes the euro relatively more attractive to investors than other currencies, which makes it rise against the US dollar. | European interest rates rising makes the euro relatively more attractive to investors than other currencies, which makes it rise against the US dollar. |
| In recent months, when that has happened, oil prices have also risen. | In recent months, when that has happened, oil prices have also risen. |
| The reason given is that some investors see the US currency and oil as alternative investments, so if they think the dollar is going to fall then they buy oil instead. | |
| This is in contrast to the previous situation, when a weak dollar was seen as a sign of a weakening US economy, which would reduce the demand for oil and hence cut the oil price. | This is in contrast to the previous situation, when a weak dollar was seen as a sign of a weakening US economy, which would reduce the demand for oil and hence cut the oil price. |