The European Central Bank left interest rates unchanged today, but signaled that a hike is on the way.

At today’s meeting, the Governing Council of the ECB decided that the minimum bid rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 3.25%, 4.25% and 2.25% respectively.

CIBC World Markets says that today’s decision was fully expected, but in the accompanying press conference, ECB president Jean-Claude Trichet very clearly signaled a 25 basis point rate rise is expected for the December meeting.

The ECB remains optimistic on growth, CIBC said, suggesting that a trend growth rate should prevail into 2007. “As for inflation, upward risks to the medium term inflation outlook are still identified and the ECB expresses renewed concern about wage growth prospects as the labour market is tightening,” it says.

“President Trichet did not give away much with regard to the 2007 rate outlook, but we were not expecting him to do so,” CIBC says. “So a December rate hike is very much ‘in the bag’ and we believe that this will not be it.”