ECB leaves interest rates unchanged
The European Central Bank left interest rates unchanged shelving plans for an increase as the US housing slump threatens to curb economic growth.
By Agencies |
FRANKFURT: The European Central Bank left interest rates unchanged on Thursday, shelving plans for an increase as the US housing slump threatens to curb economic growth.
Policymakers meeting in Frankfurt kept the benchmark refinancing rate at 4%. The bank may raise the rate to 4.25% in October, according to a survey. The collapse of the US subprime-mortgage market has made banks reluctant to lend, pushing up the cost of credit and causing turmoil on world financial markets.
The ECB earlier on Thursday added 42.2 billion euros ($57.7 billion) in emergency cash to ease a credit drought that had pushed overnight deposit rates to a six-year high. “The ECB finds itself in a dilemma,” said Rainer Guntermann, an economist at Dresdner Kleinwort in Frankfurt.
“Economic fundamentals require at least one more rate increase and inflation concerns haven’t eased. On the other hand, it needs to deal with market turbulence,” he said.
Trichet was expected to explain Thursday’s decision in Frankfurt. ECB President Jean-Claude Trichet on August 27 retreated from a stance of “strong vigilance” on inflation, language he used to signal previous rate increases.
Policymakers meeting in Frankfurt kept the benchmark refinancing rate at 4%. The bank may raise the rate to 4.25% in October, according to a survey. The collapse of the US subprime-mortgage market has made banks reluctant to lend, pushing up the cost of credit and causing turmoil on world financial markets.
The ECB earlier on Thursday added 42.2 billion euros ($57.7 billion) in emergency cash to ease a credit drought that had pushed overnight deposit rates to a six-year high. “The ECB finds itself in a dilemma,” said Rainer Guntermann, an economist at Dresdner Kleinwort in Frankfurt.
“Economic fundamentals require at least one more rate increase and inflation concerns haven’t eased. On the other hand, it needs to deal with market turbulence,” he said.
Trichet was expected to explain Thursday’s decision in Frankfurt. ECB President Jean-Claude Trichet on August 27 retreated from a stance of “strong vigilance” on inflation, language he used to signal previous rate increases.
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