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 user 2007-06-06 at 2:02:00 pm Views: 59
  • #18276

    ECB raises eurozone rates to 4%
    The European Central Bank (ECB) has raised interest rates for the eurozone to 4% from 3.75%.
    increase takes rates in the area to their highest level for six years
    and means they have doubled in 18 months.The rise had been expected
    following a series of inflationary warnings from ECB members in recent
    weeks.At his news conference, ECB president Jean-Claude Trichet used a
    form of words to suggest there may be more rate rises this year, but
    not next month.

    Confidence high
    The eurozone economies, especially Germany, have been growing strongly in 2007.
    in the eurozone is at its lowest level since the launch of the euro
    while confidence is high and business activity is expanding.The ECB has
    revised upwards its forecast for inflation in the eurozone this year to
    2% from 1.8% but it has not changed its forecast of 2% for next year.Mr
    Trichet said that eurozone monetary policy is “still on the
    accommodative side”, which analysts interpreted to mean that he was
    prepared to allow this growth to continue.

    ‘Monitor closely’
    Mr Trichet had dropped the word “accommodative” from the statement, it
    would have suggested that rates were approaching their peak.And the ECB
    president did not use the term “strong vigilance”, which he used in May
    as a signal that rates would rise this month.He said that the ECB’s
    governing council would “monitor closely all developments”.In the past,
    saying that he was watching inflation “very closely” meant that a rise
    was a few months away.”Trichet is in close monitoring mode, liquidity
    is ample and more importantly he says monetary conditions remain
    accommodative – that confirms that there are more rate hikes in the
    pipeline,” said Audrey Childe-Freeman, an economist at CIBC World
    Markets.Marc Stocker from BusinessEurope, which represents 20 million
    European companies, said: “We don’t have any strong reservations with
    today’s decision, which was justified by prevailing economic
    conditions.”The ECB’s benchmark rate – the rate that has been raised
    from 3.75% to 4% – is the minimum bid rate for its regular refinancing
    operations.Its two other key rates have gone up by the same amount. The
    deposit rate is now 3% and the marginal lending rate is 5%.