The European Central Bank has kept interest rates for the euro zone unchanged. Economic data over the past month has contained nothing to change ECB chairman Jean-Claude Trichet’s view that the region’s economy will grow solidly and there’s still a danger of higher inflation.
In his comments after the decision, Trichet seemed to warn that another increase is likely in June: “Given the favourable economic environment, our monetary policy continues to be on the accommodative side with key interest rates moderate, money and credit growth vigorous, and liquidity in the euro area ample by all plausible measures. Therefore looking ahead, acting in a firm and timely manner, to ensure price stability in the medium term, is warranted.”
This month the US Federal Reserve and the Bank of England also kept their key interest rates unchanged, both at 5.25%. The ECB rate is expected to go up to 4% in June and the rate in Japan is just 0.5%.
The fact that the euro continues to strengthen against other currencies – particularly the Japanese yen – helps the ECB in its fight against inflation.
But at the same time economic confidence is growing in the region and oil prices have risen roughly 25% since January.
Annual inflation was 1.9% in March. So for the seventh month running it was in line with the ECB’s target of just below two percent, another reason the rate was kept unchanged this month.