The European Central Bank (ECB) kept interest rates at 4 per cent today in a widely expected decision as inflation remains steady.
Financial markets now are awaiting guidance on whether the ECB will next raise interest rates in September or October. ECB President Jean-Claude Trichet holds a news conference at 1.30pm.
Central bankers worldwide have signalled they are on heightened inflation watch during the current powerful global economic expansion. The Bank of England raised rates by a quarter percentage point to 5.75 per cent earlier today.
If Mr Trichet toughens his language when he presents this month's policy statement, that would be taken as a signal that a September rate rise is probable. He could do this by saying the Governing Council is monitoring inflationary dangers "very closely", as opposed to merely "closely" monitoring as in the June statement.
Unchanged language would leave the timing of the next rate move up in the air, possibly pointing to October.
ECB policymakers have consistently warned that price risks are on the upside in an economy growing at an above-trend rate around 2.6 per cent. Unemployment has tumbled to record lows of 7 per cent, and lending is rising at double-digit rates.
Solid growth is fast using up spare capacity in factories and labour markets, heightening the danger that inflation will accelerate. It has held below the ECB's ceiling of 2 per cent for 10 months, but ECB policymakers doubt this can last.