Europeans aim for joint rate rises

Europe's central banks are set to raise interest rates simultaneously on 6 June, say leading economists. The Bank of England, the European Central Bank and the Swedish Riksbank are likely to hike rates at their respective policy-making meetings in just over a fortnight.

The move, which could be interpreted as evidence of economic convergence between the eurozone and its major candidates for entry, is likely as central bankers in London and Frankfurt make increasingly hawkish noises about inflation, say Lehman Brothers economists.

At the launch of the latest BoE Inflation Report last week, deputy governor Mervyn King appeared to raise the spectre of early rate rises. He said that 4 per cent was below average and therefore 'it's likely that rates will return to a more normal level'.

In Europe the recent pay settlement for striking IG Metall workers in Germany, and persistent failure to hit the ECB price level target of below 2 per cent have raised fears of stagflation. ECB president Wim Duisenberg said that the risks to price stability are more on the upside than the downside.

The moves will see Europe's monetary policymakers part company with the US Federal Reserve, which has given little indication that rate hikes are imminent.

· Despite the bullishness of the Bank of England, figures out this week could show that the British economy has been through a recession.

Growth in the final quarter of 2001 was marginally negative, but rounded up to zero. Economists believe there is a one in three chance that the first quarter figure of 0.1 per cent could be revised down below zero on Friday. This will occur if retail sales figures fall short of expectations.