Eurobank keeps interest rates unchanged
The European Central Bank left interest rates unchanged today, waiting for more data on the state of Europe’s shaky economy before adding the stimulus of a rate cut.
The ECB’s 18 member governing council, meeting in Frankfurt, left the key refinancing rate at 3.25% where it has stood for a year,
The ECB stood firm despite last night’s 0.5% cut by the US Federal Reserve intended to shore up growth in the United States. The Bank of England also left its rates unchanged today, taking pressure off the ECB.
Most economists had predicted the ECB would not cut, but the Fed move and the worsening economy had raised speculation there was at least a chance of a move today, and many feel one is likely within the next several months.
Rate cuts spur growth by lowering the cost of credit for businesses and consumers, but can cause higher prices by increasing the supply of money in the economy.
The ECB must focus on fighting inflation first – unlike the Fed, which has a broader mandate.
