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8/1/06

Bloomberg.com: European Confidence in Economy Rises to 5-Year High


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European Confidence in Economy Rises to 5-Year High

July 31 (Bloomberg) -- Europeans' confidence in the economy unexpectedly rose to the highest in more than five years in July and inflation ran at the fastest clip since October, strengthening the argument for the European Central Bank to increase interest rates this week. An index of sentiment among executives and consumers in the dozen euro nations climbed to 107.7, the highest since March 2001, from a revised 107.1 in June, the European Commission said today in Brussels. Consumer prices gained 2.5 percent, unchanged from the past two months and the 18th successive month in which they topped the ECB's target of just below 2 percent.

The ECB is likely to raise interest rates this week for the fourth time in eight months to curb inflation fanned by record oil prices and the strongest economic expansion since 2000, all 34 economists surveyed by Bloomberg News said. It would speed up the clip of rate moves to every two months from quarterly. Germany's unemployment rate in July fell to the lowest in almost two years as growth accelerates in Europe's largest economy, strengthening the European Central Bank's case for a rate increase this week.

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