By Rainer Buergin
Frankfurt, July 12 (Bloomberg) -- The European Central Bank will probably signal today in its monthly report that policy makers won't reduce interest rates next week, analysts said.
The ECB lowered its benchmark rate a quarter of a point to 4.5 percent on May 10, the first time it reduced borrowing costs in two years. The bank hasn't cut rates more because inflation has exceeded the ECB's goal of 2 percent for a year.
``If their rhetoric is unchanged, there is a risk they will go into the summer recess without cutting rates,'' said Rainer Gunterman, economist at Deutsche Bank AG in Frankfurt. ``People will be watching to see whether their language is different from Duisenberg's last week.''
ECB President Wim Duisenberg told reporters last week that the inflation rate will ``only just'' fall below 2 percent next year and rates are ``appropriate for some time to come.'' German business confidence is at a two-year low and French industrial production is declining. ABB Ltd. halted worldwide hiring on July 2 as global economies slow.
The International Monetary Fund predicts growth in the 12 countries sharing the euro will slow to 2 percent this year from 3.4 percent last year, while U.S. growth is seen slowing to 1.5 percent from 5 percent.
The ECB will release the monthly report for July at 10 a.m., Frankfurt time. Policy makers meet on July 19 and Aug. 2 before a month-long summer recess.
`Digging In'
The ECB hasn't lowered rates as much as much as the U.S. Federal Reserve. The Fed trimmed rates six times this year -- at every meeting of policy makers and twice in between -- to 3.75 percent from 6.5 percent at the start of the year.
While the Fed also has a mandate to spur employment, the ECB's sole goal is to rein in inflation. That's given European policy makers less room to maneuver as companies such as Siemens AG, BASF AG and Nokia Oyj say a slowing economy will erode profit growth and fire workers.
``The ECB is digging in to do just one thing -- deliver inflation of less than 2 percent,'' said Klaus Baader, an economist at Lehman Brothers Holdings Inc. in London. ``Unless there's a massive surprise, they are likely to stick to the tone of Duisenberg's previous remarks.''
Consumer prices in Europe gained 3.4 percent in May, the biggest rise since the euro's debut in 1999. French consumer prices will probably rise 0.1 percent in June from May and gain 2.1 percent from a year earlier, according to the median of 12 economists surveyed by Bloomberg News. The figures are released at 8:45 a.m., today.
Investors have scaled back their expectations of ECB rate reductions. The implied yield on the three-month Euribor interest rate futures contract maturing in September was 4.27 yesterday, compared with 4.17 percent a month ago.