Both the European Central Bank and the Bank of England left their key interest rates unchanged today, although a hike is likely in Europe and a cut is possible in England, according to one economist.

The ECB left its key marginal lending, repo and deposit rates unchanged at today’s meeting, at 3.5%, 2.5% and 1.5% respectively. However, CIBC World Markets reports that ECB president Jean-Claude Trichet’s press conference statement confirms that a rate hike is very much on the June 8 agenda.

“The ‘vigilance’ word (usually referred to in the month preceding a rate hike) has been used three times in the statement and a few more times in the Q & A session,” it reports. “Not surprisingly, the ECB has obviously found some comfort from the recent improvement in economic indicators, with the continued growth and a broadening in activity expected in Q2.”

The short-term risks are now said to be balanced (vs downside before) and the recent rise in oil prices has not gone unnoticed, CIBC notes. “Meanwhile, the [near term] inflation outlook remains tilted to the upside, with upside risks persisting. It is the same old story for monetary growth: the ECB president reiterated that the stimulative effect of low interest rates explains the strength in money supply and this is a continued upside risk to price stability,” it says.

Meanwhile, the Bank of England left its interest rates unchanged at 4.5% for the ninth consecutive month. It did not issue an accompanying policy statement. “As per usual when a rate decision is not controversial/surprising, we have no explanatory statement but the May minutes (due in a fortnight) and the latest inflation report (due next week) will give an update on the Bank’s current thinking,” CIBC says.

“The better tone observed in a few recent indicators is likely to be welcome though and a majority of members will feel tempted to move further away from the rate cut scenario,” CIBC suggests. “However, we continue to argue that it is not an all clear for the UK economy (see rising unemployment and declining real disposable incomes) and ruling out future rate cuts altogether is premature. For now, the Bank is clearly in a wait & see mood though.”