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Thursday, October 02, 2008

ECB Holds Key Interest Rate at 4.25%

FOXBusiness

The European Central Bank left its interest rate unchanged at 4.25% as the growing threat of a financial crisis spreading across Europe overtook fears of inflation.

At a press conference Thursday following the announcement of no action, European Central Bank President Jean-Claude Trichet said recent financial turmoil had created “extraordinarily high uncertainty,” according to Dow Jones.

Meanwhile, inflation risks appeared to be calming down, Trichet said.

“We have seen a reduction in the upside risks of inflation. They have diminished, not disappeared,” he said.

Trichet said the decision to leave Europe’s benchmark interest rate at 4.25% was unanimous, and added that the Central Bank’s Governing Council also discussed the possibility of a rate cut.

The 15-nation euro zone is fighting high inflation, low growth and dim short-term prospects for consumer and industrial demand as the global financial crisis unfolds.

European economists have been speculating that the ECB will cut rates in the near future. But Trichet’s comments suggest that move may come sooner rather than later.

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