ECB holds rate at 3.25% but points to further hikes

THE European Central Bank held its interest rate at 3.25% on Thursday and signalled credit costs will rise again in December to keep inflation in check and also kept the door open for further hikes in 2007.

ECB president Jean-Claude Trichet used, as expected, the key phrase “strong vigilance” to confirm market expectations for a rate to rise to 3.5% next month. Acting in a firm and timely manner was essential to control inflation pressures, he said.

Inflation was likely to overshoot the ECB’s 2% ceiling both this year and in 2007 and money and credit growth is strong, Mr Trichet said. “It is clear we are in a posture of strong vigilance,” he said at his monthly news briefing.