ECB Holds Rates At 4 Pct, Trichet Signals Awaited

The European Central Bank held its benchmark interest rate as expected at 4.0 percent on Thursday.

The European Central Bank held its benchmark interest rate as expected at 4.0 percent on Thursday, leaving markets awaiting guidance on the timing of the bank's next move.

ECB President Jean-Claude Trichet may provide hints on whether to expect a rate increase in September or October when he releases the ECB's policy statement at a news conference at 1230 GMT -- his last scheduled regular briefing until September.

Before the rate decision, most economists polled by Reuters [ECB/INT] expected the ECB would wait until September to raise rates further to 4.25 percent. Rates are already at a near six-year high after June's rise of a quarter percentage point.

Euro zone inflation has been in line with the ECB's price stability target at 1.9 percent or less since September last year, allowing policymakers to tighten at a measured pace.

ECB officials have repeatedly said they expect inflation to rise by the end of the year due to high oil prices and shrinking spare capacity in the economy.

Over the course of this tightening cycle, the ECB has used a predictable series of code words to signal rate rises.

If Trichet says the Governing Council will monitor inflation risks "very closely" -- rather than just "closely" as used after June's rate rise -- analysts are likely to view this as confirmation of a September rate rise.

As well as holding the minimum bid rate on its weekly refinancing operations steady at 4.0 percent, the ECB also confirmed its deposit rate remained at 3.0 percent and its marginal lending facility at 5.0 percent.