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Status quo for borrowing costs


Status quo for borrowing costs


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The European Central Bank and the Bank of England have both kept interest rates unchanged but the latter is to pump yet more money into the British economy.

The main UK interest rate remains at 0.5 percent and the European Central Bank’s at one percent. ECB President Jean-Claude Trichet said the euro zone’s economy will not return to growth until next year: “Recent data releases and survey information still suggests that economic activity over the reminder of this year is likely to remain weak although the pace of contraction is clearly slowing down.” The ECB is waiting to see the impact of its efforts so far to revive the economy and credit flows. But the UK central bank obviously felt the British economy still needs more major stimulus so will print an additional 50 billion pounds to buy up government bonds despite fears that could trigger a future surge in inflation. Currently the concern is deflation as prices fall but the central banks believe that is due to the collapse of oil prices from their peak of a year ago. The ECB continued to urge commercial banks to lend out the money they have borrowed from the central bank. The Bank of England also pointed to tight credit conditions as slowing down Britain’s economic recovery.

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