European Central Bank not to hike rates



The European Central Bank has Decided to Wait Further Before Raising Rates

The European Central Bank has Decided to Wait Further Before Raising Rates

Despite fears of inflation creeping up, the European Central bank has decided to keep its key lending rate unchanged at the historical low level of 1%.

The ECB also decided to keep the two other rates – the deposit rate and the marginal lending rate, unchanged at 0.25% and 1.75% respectively.

The European Central Bank’s target inflation has been breached and the European Union recorded an inflation rate of 2.4% in January.

The bank said it expects inflation to remain over the targeted 2% in 2011 before softening in 2012.

Last month, the bank’s President Jean-Claude Trichet said inflation rate risk in the 17 member union was balanced.

However, analysts expect Mr. Trichet to change his opinion, as strong inflationary trends start building up due to surging commodity and crude prices, when he addresses the media on Thursday.

Among the EU members, German economy has been marching ahead, with the ‘peripheral’ states also showing signs of recovery except Greece.

A consensus poll conducted by Reuters shows economists expect the ECB to raise rates by the third or fourth quarter of the current financial year.

Leave your comment

  • (not published)