Banks Left Rates Stable in Europe

123jump.com Staff
02 Aug, 2007
New York City

The European Central Bank and The Bank of England kept rates same after successive rate hikes this year. The elevated interest rates of 4% by the ECB and 5.75% by the BoE are expected to slow economic growth and inflation pressures in the economy. But no signs of slowdown has yet emerged. The 13-member nation group or eurozone is experiencing low interest rates and stable unemployment in the region. However, the wages are rising in the region.

[R]9:00AM New York, 2:00PM London – European banks kept interest rates unchanged.[/R]


The Bank of England kept the interest rates unchanged at 5.75% and the European Central Bank left interest rates unchanged to 4%. After several successive rate hikes in the last twelve months banks are still assessing the impact of increased interest rates on the economies of Europe and the U.K.

With the highest rates among the Group of Seven nations, UK is likely to stay put on interest rates at least for the next meeting. UK has targeted inflation rate of 2% but in the recent months inflation has exceeded that. With the rising economic growth businesses have managed to pass price hikes to customers fueling inflation to 3.1% in March before settling to 2.4% in July. Majority of the economists are project annual economic growth between 2.5% and 3% for the current fiscal year in the UK.

The 13-member nations group where euro is the currency is experiencing one of the lowest unemployment levels in decades. The rising fuel prices and falling levels of unemployment have forced bankers to keep rates high in the euro zone. The rates are likely to be revised higher after September meeting but lot depends on cost of fuel and food and widening contagion of credit losses from the U.S. to Europe. The inflation in the region has remained below 2%, banks target, but there enough inflationary pressures in the pipeline. The unemployment in the region is hovering around 6.9%.

After the news on interest rates the euro and the pound traded nearly unchanged and stock markets in the region edged up a fraction. Most market analysts and economists had factored that rates will not be revised.