Trichet Signals July Rate Increase With ‘Strong Vigilance’
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The European Central Bank signaled a July rate increase while damping investor expectations for further moves by reiterating a forecast that inflation will fall below its 2 percent limit next year.
The euro dropped more than a cent and German government bonds fell after ECB President Jean-Claude Trichet said the central bank hadn’t raised next year’s inflation forecast from 1.7 percent, fueling speculation it won’t increase rates as quickly as previously expected. At the same time, Trichet signaled the bank intends to lift its benchmark in July after keeping it at 1.25 percent today.