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Eurozone 'losing momentum'?

Jaimie Kanwar

After a strong start to 2008, the economy of the Eurozone is showing signs of fatigue...

This is the view of Holger Schmieding, senior european economist at Bank of America, who was responding to the European Central Bank's decision hold interest rates at 4%: "After a strong start into 2008, the eurozone is losing a lot of momentum”, he said.

After Friday's rate hold, ECB President Jean-Claude Trichet admitted a future rise was "possible" and conceded that some members of its Governing Council favoured a hike.  Said Mr Trichet: “The Governing Council is in a state of heightened alertness over economic conditions, but it will take into account all prevailing factors before making a decision”.

He added: "We considered - it is not excluded - that after having carefully examined the situation, we could decide to move our rates [by] a small amount in our next meeting in order to secure the solid anchoring of inflation expectations, taking into account the situation. I don't say it's certain. I say it's possible."

There are growing signs that the eurozone economy is weakening.  Inflation in the eurozone was 3.6% in May, above the target of about 2%, and official EU data shows that retail sales fell in April, adding to the call from some sectors for a reduction in rates.