FRANKFURT, Germany, Dec. 1 (UPI) -- The European Central Bank is set to increase its inflation forecast for 2004, raising fears that it might come under pressure to lift interest rates.
While observers have expected the ECB to raise interest rates from their post-war low of 2 percent, the new inflation forecast may bring that change sooner than expected, the Financial Times reported Monday.
The ECB's twice yearly projections are expected to forecast inflation of close to 2 percent next year, well above the 1.3 percent estimated in June this year.
Economists think the higher forecast will fuel unease on the ECB's governing council, where members have already voiced concern about deepening budget deficits and excessive money supply growth.
The projections will be discussed by the governing council when it holds a rate setting meeting on Thursday. They will be published next week in the ECB's November monthly bulletin.
Jean-Claude Trichet, the bank's new president, is likely to note the inflation issue in his statement Thursday.
