The Governing Council of the European Central Bank decided to leave its interest rates unchanged at Thursday’s meeting, but signalled that a hike is coming.

“This policy outcome was totally expected in the market as after the Aug. 3 rate hike,” noted CIBC World Markets, adding that the ECB’s president had hinted at “a likely wait and see approach for this meeting so today’s interest rate outcome is a bit of a non event.”

The following press conference proved of more interesting, CIBC found. “And as we suspected, the ECB president Trichet has basically signalled that a rate hike is on its way at the Oct. 5 ECB Meeting by referring to a ‘strong vigilance’ approach.”

“This is the policy language that has preceded previous rate hikes so that an October move is very much in the bag,” it concluded.

“We are very much of the view that there will be at least another rate hike after October and this can only be confirmed by the overall tone of today’s press conference and importantly, by the fact that the latest ECB staff growth and inflation projections have been revised higher, not only for this year, but for next year too,” CIBC predicted.

“Overall, this is all bullish for the euro and negative for the Eurozone bond market,” it said. “An October rate hike is definitely on its way and it looks like there will be more to come too. If anything the risk may be that Euro rates peak higher than initially presumed, but first let’s see how the Eurozone economy absorbs past rate rises, a stronger euro, a slowing global economy and a possible German VAT hike in early 2007.”