London, April 12 (Bloomberg) -- Euro money-market rates had the largest gain in 1 1/2 years onexpectations the European Central Bank will be slower to cut interest rates than investorspreviously anticipated. Traders reduced wagers on how soon the euro-zone's benchmark refinancing rate will fall from itscurrent 4.75 percent, after the central bank unexpectedly left the rate on hold yesterday. ``The lack of a rate cut has moved the market to reassess the timing'' of a move in rates, saidJames Craigen, money markets manager at Gulf International Bank. He estimates the ECB willcut rates by the end of May. The three-month Euribor rate -- the rate euro-area banks lend to each other -- rose 16 basispoints to 4.74 percent, the biggest gain since Sept. 29, 1999. The gap with the June futures rateshrank to 22 basis points, from as much as 43 on March 22. The June rate climbed 7 basispoints to 4.52 percent. ECB President Wim Duisenberg yesterday said inflation risks ``have not disappeared,'' addingthat there's no sign of a global recession yet. He also rebuffed calls from politicians andcompanies for lower borrowing costs. ``I hear but I do not listen,'' he said. French inflation sped to 0.5 percent, its fastest monthly pace since September, the governmentsaid today. The annual rate held at 1.4 percent, the lowest in the region.
Resisted Bullies
``The ECB is not going to be bullied into doing anything,'' said Craigen. ``Duisenberg's decided`we decide interest rates -- not you.' '' Still, ``German retail sales were poor,'' bolstering the casefor a rate cut, he said. German retail sales fell for first time in three months in February, the government reported today.Sales fell 1.6 percent from January, after rising 2.2 percent from the previous month. U.S. retail sales unexpectedly fell in March, the Commerce Department said today. Futures and cash rates may rise further if rate-cut expectations prove unrealistic, traders said. ``I'm still nervous about being in the short end cash,'' said Neil Hitchens, a bond manager whohelps oversee $14 billion in assets at Global Asset Management. He favors two- to five-yearbonds. ``Anything shorter than that is very expensive and that's the area where there's the mostdisappointment possibly to come.''