ECB Keeps Interest Rates At 4%

The European Central Bank has today announced its decision to maintain interest rates throughout the Eurozone over the next month, amidst growing fears of continued volatility in world markets.

The European Central Bank announced the move today after the meeting of its policy committee, in which it is widely expected the issue of current market conditions and mixed internal economic indicators were behind the decision to maintain rates at their current level.

Until the recent upset caused by ongoing sub-prime mortgage lending crisis, and fears of a credit crunch, analysts had expected the ECB to raise rates to 4.25% in a bid to reign in economic growth and prevent inflationary pressures.

The decision came unanimously from the committee, and was later justified by ECB president Trichet as being a prudent move given the recent unsettling market conditions caused by the US housing market.

Whilst he said that the fundamental aspects of European growth were in place, the extent of the upheaval from the US markets has made it impossible to make any policy decision other than maintaining rates at their current level.

With the European Central Bank having risen rates no less than eight times over the last two years, with rising inflationary pressures as a consequence of strong regional growth, analysts had expected that rates would continue to rise over this month to keep inflation in check.

However with growth slowing as a result of market unrest and falling investor confidence, the Bank have decided not to progress further with any rate intervention as a result of the impact of these external factors.

Similarly today, the Bank of England also announced its decision to maintain interest rates in the UK at 5.75%, for reasons similar to those borne by the ECB, which will see most of Europe freeze rates for the next period.

Story link: ECB Keeps Interest Rates At 4%