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To: Jacob Snyder who wrote (28698)	10/7/1999 7:07:00 PM
From: Jacob Snyder	Respond to of 99985

Europeans echo Greenspan: ECB, Bank of England Leave Key Refinancing Rates Unchanged Dow Jones Newswires October 7, 1999 NEW YORK -- Both the European Central Bank and the Bank of England maintained their key interest rates, but did nothing to quell speculation that rates may be raised before year end in response to a European economic recovery and concerns about inflation. See a statement by ECB President Wim Duisenberg at a news conference Thursday. The ECB said it will keep its main refinancing rate at 2.5%. Many economists had believed chances were good the ECB governing council would raise rates at its latest regular monthly policy meeting. The magnitude and timing of a possible future rate increase remains unclear. The euro-zone central bank also confirmed that its overnight deposit rate will remain at 1.5% and its marginal lending rate will continue to be at 3.5%. The deposit rate and the marginal lending rate represent the floor and ceiling for money-market rates in the 11-nation euro area. "A rate rise is really only a question of timing," said Manuela Preuschl, economist with Deutsche Bank in Frankfurt. She said a move is possible later in October or November. "Monetary policy is expansive," she added. "The ECB will want to put rates on a more neutral course of 3%." The ECB council's next meetings are Oct. 21, Nov. 4 and Nov. 18. Speaking soon after the latest policy meeting, ECB President Wim Duisenberg clearly signaled an end to the central bank's easy monetary policy, which has been in place for more than a year. That stance has "served its purpose" and "contributed to a resumption of growth in the climate of price stability," Mr. Duisenberg said. He also said the ECB is now assessing whether the easy stance has been in place long enough, citing the rising risks to euro-zone price stability and growth in the money supply. Mr. Duisenberg indicated the ECB won't micromanage euro-zone economic affairs through rate policy, but will adjust rate policy when conditions merit. "It is not an inclination of the ECB to play an activist role to fine-tune the economy, but any measures taken have to be and will be timely," he said. The ECB simply requires more evidence of inflationary pressures before raising rates, Mr. Duisenberg added. Last week, ECB officials signaled that they were more worried about inflationary risks. As a result, about 45% of the 40 banks surveyed this week by Dow Jones believed the ECB would raise rates sometime before the end of 1999, marking an enormous shift in sentiment from two weeks earlier, when only 8% of banks predicted such a move. A number of economists expect the ECB to raise the main refinancing rate by a quarter point in the coming weeks to signal the central bank wants to move pre-emptively to avert inflation. Another quarter-point move would then be likely in the first quarter of 2000, these economists say. Deutsche Bank's Ms. Preuschl believes it is more likely the ECB will completely reverse the half-point cut implemented on April 8, a move that was regarded as fighting off possible deflationary trends at the time that no longer exist. The main refinancing operation is the ECB's most important open market facility. It plays a crucial role in steering interest rates, managing liquidity in the market and signaling the stance of monetary policy. In London, the BOE left its official dealing, or repo, rate unchanged at 5.25%. The decision, which was expected, was announced following the BOE's monthly Monetary Policy Committee meeting Wednesday and Thursday. A Dow Jones Newswires survey of 19 United Kingdom economists last week showed 16 predicting the rate would be left unchanged. The BOE announced its decision to leave rates unchanged without comment, noting only that the minutes of the meeting will be published Oct. 20. The euro-zone rate decisions follow Tuesday's announcement by the U.S. Federal Reserve that it would maintain its current short-term rates, but also switch from a neutral to a tightening bias in deliberations on monetary policy.