Will interest rates drop?

[Howitzer]

I don't think they'll be too hasty by raising on a 2-monthly basis. I think they'll stick to a 3-month cycle as they normally do. This would still give a rate of 3.25% by the end of 2006 and well on the way to 4% during 2007.

I'm confused. The ECB raised rates in Dec 05 (first change in 2 years), then again in March (3 month gap). They'll probably raise again in May (2 month gap).

Where does the '3-month cycle as they normally do' come from? There's no sequence there as far as I can see.

 

[ivuernis]

I'm confused. The ECB raised rates in Dec 05 (first change in 2 years), then again in March (3 month gap). They'll probably raise again in May (2 month gap).

Where does the '3-month cycle as they normally do' come from? There's no sequence there as far as I can see.

Between early 2000 and late 2001 when the rate went from 3.25% to 4.75% and back down to 3.25% the initial rate hikes and subsequent drops were almost every 2 months and the upside and downside of the rate changes almost mirrored each other.

When the rates were dropped further in early 2003 they were done in 3-month cycles. Now that they are raising them again I would guess they'll do it at a fairly steady pace (every 3 months). Just my 2-cents based on their track record of raising and dropping rates. Even at this moderate pace rates are still likely to go higher than most people expect. Anything faster might set some alarm bells ringing.