MercoPress. South Atlantic News Agency

Euro benchmark interest rate unchanged at 3.75%

The European Central Bank decided on Thursday's meeting, held in Dublin, to maintain the benchmark interest rate on hold at 3.75%. However many analysts believe ECB's “strong vigilance” could see rates rise as early as June to keep inflation in check.

The last time the ECB raised rates was in March, when it was increased by a quarter of a percentage point from 3.5%. "The information that has become available since our last meeting has further underpinned the reasoning behind our decision to increase interest rates in March. Strong vigilance is of the essence in order to ensure that risks to price stability over the medium term do not materialize", said ECB president Jean-Claude Trichet. "Given the favorable economic environment, our monetary policy continues to be on the accommodative side, with the key ECB interest rates moderate, money and credit growth vigorous, and liquidity in the Euro area ample by all plausible measures", he emphasized. But "monetary development continues to require very careful monitoring particularly against the background of solid expansion in the economic activity and still strong property market developments". "This will contribute to ensuring that medium to longer-term inflation expectations in the Euro area remain solidly anchored at levels consistent with price stability. Such anchoring is a prerequisite for monetary policy to make an ongoing contribution towards supporting sustainable economic growth and job creation in the Euro area", said Trichet. Some market experts take the view if the Euro zone economy gains further momentum as the year progresses, the ECB could tighten monetary policy further to 4.5% by mid-2008. The Euro was trading at 1.352 against the dollar in afternoon European trading, below the record 1.368 it reached on April 27.