ECB's hawkish stance to harden

The recent batch of reasonably upbeat economic data, coupled with further signs that price pressures may be building, will ensure that President Trichet continues to strike a hawkish tone at next week’s council meeting. But he is unlikely to go as far as preparing the ground for an imminent hike in interest rates. Meanwhile, the President will reiterate that the ECB’s government bond purchase programme is ongoing and will probably confirm that the Bank will continue to provide unlimited one- and three-month loans to commercial banks in Q2. But he is likely to emphasise that these loans will be unwound once market conditions return to normal.