US rates may be raised in June

EUROPEAN and US interest rates look to be on hold for the moment, but the level of uncertainty about when the next interest rate moves will be made have increased.

It is still expected that British interest rates will be increased next month after the next meeting of the Monetary Policy Committee.

Far less certain is the intentions of the European Central Bank, which may cut rates one more time. But the odds on that happening have lengthened as economic recovery in the zone shows healthier signs.

Odds on US interest rates coming sooner have shortened. Earlier, the view was that rates would stay on hold until after the November election.

That has changed, with analysts suggesting the US will face their first increase in June.

The better outlook on jobs and profits have brought nearer the day of interest rate reckoning, where rates have been at the historically low level of 1%.

Expect dearer rates sooner rather than later, warn economists in the latest edition of the Bank of Ireland Global Markets bulletin.

Chief economist Dan McLaughlin estimates the US hit an annual 5% GDP growth in the first quarter of 2004.

Improving employment figures, underpinned by strong profit growth is adding to the view of a US economy indisputably on the way to recovery.

That being so, expect interest rates to go to 1.25% sooner rather than later.

In its bulletin, the bank still has them at 1.25% at the end of September, while British rates will be up by 0.5% by then to 4.5%.

In the case of the ECB, BoI says rates will still be unchanged at the end of September standing at 2%.

In the year so far the US has seen economic recovery accelerate, leading to GDP growth of 4.6%.

The EU will grow by 1.7% in 23004, whereas the British economy will stake out the middle ground with GDP of 3.4%.

Across all the zones, inflation will stay below 2% with the strongest-growing US economy turning in a 1.9% rate for the year against 1.9% in the case of Britain and the eurozone.