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Strategies & Market Trends : Galapagos Islands

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To: zonder who wrote (49862)	1/8/2004 12:37:06 PM
From: Lazarus_Long	of 57110

ECB leaves interest rates at 2% European Central Bank holds rates despite calls for lower borrowing costs to counter weak dollar. January 8, 2004: 8:18 AM EST FRANKFURT (Reuters) - The European Central Bank left interest rates unchanged Thursday as widely expected, defying calls that cheaper cash is needed to prevent a strong euro from hurting economic recovery. The ECB said its Governing Council had decided to keep the euro zone's key rate at 2.0 percent at its monthly monetary policy meeting. The strong euro gives the ECB more breathing space, as it saps inflation by lowering import prices. Most analysts in a Reuters poll had said the ECB would stay put this month and that it would wait until the second half of 2004 to raise rates. But calls are mounting for the ECB to lower borrowing costs. German Economy Minister Wolfgang Clement said that euro strength is a problem for the euro-zone economy and puts Germany's 2004 growth forecast at risk. Belgian Prime Minister Guy Verhofstadt and Germany's DIHK Association of Chambers of Commerce and Industry both have called for lower interest rates to help weaken the euro's exchange rate against the dollar. If the euro stays strong, the ECB may further delay tightening, or even consider lowering rates again, analysts say. ECB President Jean-Claude Trichet will hold a news conference later in the day to explain the decision to leave the minimum bid rate at the ECB's weekly refinancing auctions unchanged at the two percent record low. Financial markets will be eager to hear what Trichet says about the euro, which has gained some five percent against the dollar since December, hitting new life highs above $1.28 this week. So far, the ECB has declined to comment in detail on the rise, repeating its line that a strong and stable currency is in the interests of the euro zone. money.cnn.com

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