ECB likely to hold off rate rise

EUROPEAN Central Bank President Jean- Claude Trichet dashed investors’ expectations for an increase in interest rates next month, sending the euro to its biggest decline in two weeks.

“The present high probability which is given for an increase of rates in our next meeting does not correspond to the present sentiment of the governing council,” Mr Trichet said at a press conference in Frankfurt, after the ECB kept its benchmark rate at 2.5%.

At same time, interest rates are still “very low’ and inflation risks “on the upside.”

Trichet caught investors off guard after a surge in German business confidence and manufacturing activity across the euro region prompted them to ramp up their expectations for a rate increase in May. With unemployment still weighing on consumer spending and oil prices above $60 per barrel, the ECB is giving the euro region’s economy more time to gather strength.

“We need to see a more concrete confirmation of the recovery before they raise rates,” said Michael Hume, chief European Economist at Lehman Brothers Holdings Inc.

“The best guess has to be for them to raise in June.”

Meanwhile, European Union companies such as Deutsche Post AG should be encouraged to seek damages in national courts against competitors that receive illegal state subsidies, according to a study funded by EU antitrust regulators.

The report, obtained by Bloomberg and to be released today, found that as of the end of 2005 there hadn’t been any judgements awarding such damages. Companies are holding back from filing claims against rivals because of divergent rules among EU member states and procedural hurdles, the study found.

“Private enforcement of state aid law at member state level is still in its infancy,” said the study, written by Thomas Jestaedt of Jones Day, Jacques Derenne of Lovells and Tom Ottervanger of Allen & Overy.