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ECB leaves key interest rate unchanged at 3 percent

Markets will be watching for hints of a quarter-point increase in a month’s time when bank President Jean-Claude Trichet discusses the decision at a press conference later in the day.

Despite promising second-quarter economic growth in the 12-nation euro zone and some concern about inflation, most analysts expected that the ECB’s governing council had concluded that it was too soon to raise rates.

Of 43 economists polled by Dow Jones Newswires, only one predicted a rate hike. However, the remaining 42 forecast that an increase will come when the governing council next meets on Oct. 5.

The Frankfurt-based bank last raised its refinancing rate on Aug. 3, hiking it to 3 percent from 2.75 percent. Trichet said then that the bank would monitor inflation and act to prevent it from getting out of hand _ pointing to higher rates.

However, he did not use the word “vigilance,” a term he has used in the past to signal a rate increase at the next meeting.

Trichet has used the term ahead of each of the four quarter-point increases that the ECB has made since last December.

“We expect the ECB to promise to ’exercise strong vigilance’ and maintain the forward-looking language in its statement, suggesting that the removal of monetary accommodation will probably have to continue even after October,” said Holger Schmieding of Bank of America in London.

The economy in the 12 euro-zone countries grew by 0.9 percent in the second quarter compared with the previous three months, outpacing both the US and Japan. It grew by 2.4 percent compared with last year’s second quarter.

However, EU officials have said they expect flatter growth by the end of the year, saying there would be no significant change to their forecast that the economy would grow by 2.1 percent in 2006.