Copper fell on mounting concern that the world's central banks will continue to boost interest rates to combat inflation, slowing the economy and demand for metals. Aluminium and zinc also declined.

Copper has lost 21 percent since trading at a record on May 11 after central banks in Asia and Europe increased borrowing costs. Economists forecast the U.S. Federal Reserve to raise rates when it meets on June 28-29. European Central Bank council member Nicholas Garganas said yesterday the bank is ready to accelerate the pace of rate increases inflation risk mounts.

"People look at the wider macro-economic concerns," said Neil Buxton, managing director at London-based GFMS Metals Consulting Ltd. "It's still not clear how a marginal slowdown in growth will filter down to the base metals sector."

Copper for delivery in three months declined $70, or 1 percent, to $6,930 a metric ton at 2:34 p.m. on the London Metal Exchange. Copper traded at a record $8,800 on May 11.

On the Comex division of the New York Mercantile Exchange, copper for delivery in September dropped 6.3 cents, or 2 percent, to $3.17 a pound at 9:35 a.m. local time. A futures contract is an obligation to buy or sell a commodity at a fixed price for a specific delivery date.

The Fed will raise its target interest rate by a quarter point to 5.25 percent after its meeting, according to 122 of 124 economists surveyed by Bloomberg. Interest-rate futures show traders see a 100 percent likelihood of a Fed increase. If the Fed raises the benchmark U.S. interest rate for a 17th straight time, it will extend the longest run of increases in a quarter century.
Forecasts cut

Barclays Plc, the U.K.'s third-biggest bank by market value, cut its metals price forecasts because it expects the U.S. rates to rise to 6 percent this year, compared with a previous forecast of 5.5 percent. The bank cut its forecast for average copper prices this year by 5.8 percent to $6,876. Barclays cut its nickel forecast by 3.6 percent and aluminium by 5.2 percent.

"We expect the recent pattern of sideways and highly volatile trading to continue for most of the third quarter," Barclays analysts led by Kevin Norrish said in a report yesterday.

Copper's decline is temporary, Frank Holmes, the chief investment officer of U.S. Global Investors in San Antonio, said yesterday in an interview. "We can see copper at $6-$7 a pound" as supply shortages of the metal likely will persist, he said.
Inventory decline

Copper inventory monitored by the LME fell by 2,000 tons, or 2.1 percent, to 93,050 tons, the lowest since Jan. 13, the exchange said today in a daily report.

Production of copper exceeded demand in March by 15,000 tons, the International Copper Study Group said today. Consumption in China, the world's largest copper-using nation, was down 6.4 percent in the first quarter, the Lisbon-based group said.

Nickel rose $125, or 0.6 percent, to $20,100 a ton in London, and has rallied 38 percent in the past year.

"Nickel stocks have come down a great deal so prices may rise further," said Kevin Tuohy, a London-based trader at Man Financial Ltd. The metal used to produce stainless steel rose to record $23,050 a ton May 26.

Stockpiles of nickel monitored by the LME have dropped 69 percent this year to 11,142 tons, according to LME data. This is the lowest since September 2005.

Among other LME metals, aluminium fell $40 to $2,510 a ton and lead dropped $12 to $965 a ton. Zinc gained $20 to $3,010 a ton and tin fell $25 to $7,875 a ton.