VIENNA/BRUSSELS, Dec 5: ECB policymakers gave no suggestion on Monday that the central bank would move swiftly to raise interest rates again, after bond markets fell on bullish data and hawkish comments from the Bundesbank on Sunday. Governing Council member Klaus Liebscher said no interest rate rise was planned for the time being, while his Belgian colleague, Guy Quaden, said current rates were appropriate at a time of economic recovery in the euro zone.

Many eurozone politicians, businessmen and unions were sceptical of the need for the European Central Bank to raise rates to 2.25 per cent from 2.00 per cent last Thursday, and a further rise would probably face starker political opposition.

German Finance Minister Peer Steinbrueck, in comments to a newspaper published on Monday, said he believed ECB President Jean-Claude Trichet had made clear Thursday’s move was a one-off.

If that were not the case, I’d have a different opinion, as then it would be counterproductive for economic growth and a durable recovery in Germany, the Financial Times Deutschland quoted Steinbrueck as saying.

The strongest eurozone service sector data for 16 months lent support to the ECB’s view that the economic recovery will strengthen into next year. The ECB forecasts growth of 1.4-2.4 per cent in 2006, versus 1.2-1.6 per cent in 2005.

Combined with an equivalent manufacturing survey out last Thursday, Monday’s RBS/NTC Purchasing Managers’ Index suggests the eurozone economy may grow by 0.7 per cent in the last quarter of this year, up from 0.6 per cent in the third quarter.

This, along with hawkish comments from ECB Governing Council member and Bundesbank President Axel Weber, depressed prices on bond and debt futures markets. The March 2006 Euribor future contract slid three ticks to 97.340, while two-year government bond yields rose four basis points to 2.664 per cent.

Financial analysts polled by Reuters expect the ECB to raise rates to 2.50 per cent in the first three months of next year, and to 2.75 per cent by the end of September 2006.

Weber, in a German radio interview on Sunday, stressed that eurozone credit growth was highly expansive, posing a risk to price stability over the medium term.

At this juncture a central bank must signal that it’s ready to act, and then act if necessary, he said.

The ECB forecasts consumer price inflation in 2006 and 2007 to remain above its 2 per cent tolerance threshold if market interest rates stay unchanged.

Liebscher and Quaden both struck a more cautious note.

The clear statements of last week were that no further rate steps are planned currently, Liebscher told reporters at a news conference at the Austrian central bank, which he heads.

In each individual meeting, the data needs to be evaluated, Liebscher said.

Quaden also gave no suggestion that the ECB should be preparing for a rate hike while economic growth was shaky.

Even after the moderate hike of last week, interest rates in Europe remain at historically low levels, both short-term and long-term, rates which are appropriate to a recovery, Quaden said.

Governing Council member Vitor Constancio, who heads Portugal’s national central bank, made no comment to reporters before addressing academic staff behind closed doors at the University of Coimbra in Portugal.—Reuters