Stubborn oil prices and a halt in the euro rally rule out an interest rates cut by the European Central Bank today and will probably delay further easing until later this year.
The day's highlight at the ECB's last meeting before its summer break will be a vote by policymakers on Bank of France Governor Mr Jean-Claude Trichet's fitness to take over the ECB presidency in November, market analysts said.
Delaying cuts to official euro zone rates that already are at historic lows of 2 per cent make it increasingly likely that Mr Trichet, who is expected to win easing backing from his ECB colleagues, will deliver the next credit easing.
None of the 64 ECB watchers in a Reuters survey last week forecast that the central bank will tinker with official rates today. Moreover, the analysts are pushing back from September towards the year-end as the time when they expect the next rate cut.
Inflation is not falling quite as fast as some analysts expected. Oil prices have edged back to $30 a barrel. A drought threatens foods prices and the euro's giddying ascent has halted. If inflation falling below the ECB's pain threshhold of 2 per cent is delayed, the ECB will pause a while.
But economic data give some reason for cautious for optimism. Business and consumer confidence are starting to recover, as witnessed by the German Ifo index rising for the third straight month in July. French and German governments are starting to push through budget reforms.
Stocks markets also are rebounding on improved corporate profits.