The European Central Bank hiked its rates by 25 basis points today, and the Bank of England left rates unchanged. Economists see more hikes ahead.

“When it comes to communication, [EBC president Jean-Claude] Trichet is king,” said CIBC World Markets. “After having clearly hinted at an imminent rate hike at the last ECB’s press conference, the ECB has delivered today, by raising its main marginal lending, repo and deposit rates by 25 bps, to 4.25%, 3.25% and 2.25%, respectively.”

It also noted that the post-meeting press conference, “is totally consistent with a rate hike scenario in December”. The ECB reiterated that monetary conditions remain accommodative, with the Council likely to “continue to monitor very closely all developments so as to ensure price stability over the medium and longer term.”

It added that conditions are in place “for the economy to grow at solid rates, around potential”, with the recovery proving stronger than initially expected. On inflation, risks remain to the upside.

“In the Q&A session, Trichet declined to comment on the outlook for rates for 2007 — apparently disappointing for the euro; a misjudged reaction given that the ECB never pre-commits on rates too far out. The press conference reinforces our view that the rate normalisation process is not over yet, with a December move likely next,” CIBC concluded.

As expected, the Bank of England left its repo rate unchanged at 4.75% at today’s meeting. When a policy decision is not controversial there is no policy statement accompanying the rate decision. “With oil prices back down, the US economy in an easing phase and Q2 GDP having been revised lower, there was no sense of urgency on the rate front today,” commented CIBC. “It was a no-change outcome today, but another policy tightening may not be too far away.”