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ECBleaves interestrates unchanged


ECBleaves interestrates unchanged


There were no surprises from the European Central Bank at their regular monthly meeting in Frankfurt as the bank governors kept interest rates unchanged. The widely expected decision came as ECB President Jean-Claude Trichet said economic prospects for the 12 euro zone countries were improving. But Trichet added: “Risks for economic growth continue to lie on the downside and relate to high and volatile oil prices. We will continue to monitor very closely all developments with respect to risks to price stability in the medium term. All this relies on our own credibility and our credibility is that everybody knows that we act when necessary.”

Keeping the rate at 2.25% indicates the governors think the euro zone’s tentative economic recovery could not withstand the sort of rises seen in the US over the last year and a half. The money markets anticipate a rise next month, but certainly by March or April. As expected, the Bank of England also kept interest rates unchanged at 4.5%. Economists are divided over when and what the next move be. Some say there will have to be at least one rate cut this year, while others believe the UK economy is picking up enough to support a rate rise needed to trim inflation.

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