ECB Holds Rates but Hint of December Hike

ECB President Jean Claude Trichet continued to use the term “vigilence” during his statement after the ECB rate decision. “Strong vigilance remains of the essence,” Mr Trichet said. “It is essential that inflation expectations remain firmly anchored at levels consistent with price stability. We will do all that is necessary for price stability.” These similar hawkish comments have been made throughout the central bank’s last five rate hikes. Although the ECB left rates unchanged at 3.25%, it is almost certain that they will raise by at least another 25 basis points in December.

The market was relatively somber following the comments as expectations were already priced in. The EUR/USD slipped about 20 pips to 1.2763 but quickly recovered and continues to make daily highs as it approaches the 1.2800 figure.