ECB Leaves All Key Interest Rates Unchanged
Thu, Oct 4 2007, 11:48 GMT
djnewswires.com
ECB Leaves All Key Interest Rates Unchanged
FRANKFURT (Dow Jones)--The European Central Bank kept interest rates on hold Thursday, leaving the key policy rate unchanged at 4.00%, as expected.
The ECB didn't provide any rationale for the decision, but ECB President Jean-Claude Trichet will comment on the governing council's policy meeting at a press conference in Vienna set for 1230 GMT.
The 53 economists canvassed by Dow Jones Newswires unanimously expected the ECB to keep its key refinancing minimum bid rate unchanged Thursday. The ECB has raised its rates eight times by 25 basis points since December 2005.
ECB-watchers expect Trichet to emphasize the council's focus on inflation - making it clear that while policymakers have no plan to raise rates yet, there is also no plan now to cut interest rates.
Observers will also be interested in what comments Trichet might make about the acceleration in the euro zone's inflation rate, to 2.1%, at the press conference.
Since February, the ECB has said inflation will accelerate in the latter months of the year due to volatile oil prices, both last year and this year. It is unclear whether the ECB has anticipated, or is concerned about, the possible strength of the acceleration.
ECB staff projections project euro-zone inflation to average around 2% both this year and in 2008, however oil prices are higher now than at the time of the projections. The ECB defines price stability as an inflation rate just below 2%.
Trichet is likely to reaffirm the ECB's primary goal of price stability and the ECB's readiness to act in a firm and timely manner to ensure risks to price stability don't materialize. This reassurance will be important to keep inflation expectations in check.
The ECB routinely reiterates its policy horizon is for the medium- to longer-term.
In September, the ECB said it will assess further economic data before drawing any policy conclusions, given a "high level of uncertainty" resulting from financial market turbulence.
Market participants will likely keep an eye out for any guidance from Trichet as to whether the ECB expects market uncertainty to ease or remain elevated over the coming months.
They note that the strength of the euro's appreciation against the dollar in recent weeks is equivalent to tighter monetary policy, and will be listening closely for any verbal intervention by Trichet to halt the euro's climb.
The euro hit a record high against the dollar of $1.4283 Monday, partly a reflection of the narrowing interest rate differential between the two currencies since the U.S. Federal Reserve cut its key interest rate last month. At 1147 GMT, the euro was trading at $1.4111.
Most economists surveyed by Dow Jones Newswires expect the ECB to keep rates unchanged through the first half of 2008. The council's next policy meeting is scheduled for Nov. 8.
-By Monica Houston-Waesch and Roman Kessler, Dow Jones Newswires; +49 69 29 725 520; nikki.houston@dowjones.com
(END) Dow Jones Newswires
October 04, 2007 07:48 ET (11:48 GMT) |
