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ABN Amro raises ECB rate forecast to 4.5% from 4%

ABN Amro Holding NV said the ECB will raise its main interest rate to 4.5% this year, increasing its previous forecast after economic growth in the euro region accelerated in the Q4.

ABN Amro expects the ECB to raise borrowing costs in March, June, September and December, the Amsterdam-based bank said in an e-mail yesterday. Previously the bank forecast the rate would peak at 4% this year. ECB President Jean-Claude Trichet has already prepared the ground for an increase next month, vowing to show „strong vigilance” as the pace of economic growth threatens to fuel inflation in the 13-nation euro region.
The economy grew 0.9% in the Q4, allowing the euro-area economy to expand at the fastest pace in six years for all of 2006. „Recent data, especially strong euro-area GDP, fresh signs of resilience in the US economy, continued strength in euro area money aggregates and rising wage pressures, suggest the ECB can raise interest rates further than we expected,” London-based ABN Amro economist Dario Perkins said in the note.
Economists had expected growth of 0.6% in the final three months of 2006, according to the median estimate of 39 economists in a Bloomberg News survey. The ECB's benchmark rate currently stands at 3.5%. (Bloomberg)