Friday, 8 December 2006

ECB raises rates, BoE keeps rates, Fed expected to cut next year

As expected, the European Central Bank raised its main interest rate by a quarter percentage point to 3.5 percent yesterday but the Bank of England left interest rates unchanged at 5 percent.

Meanwhile, in the US, the expectation has been tilted towards a rate cut. Reuters reports the latest on this.

The U.S. economy will expand at a weak pace next year, setting the stage for lower interest rates, according to a UCLA Anderson Forecast report released on Thursday.

The forecasting unit's latest report projected quarterly real gross domestic product growth no higher than 2.7 percent next year, reflecting the weak housing market.

And yesterday the Federal Reserve itself provided another reason for a rate cut. Reuters reports:

U.S. consumer credit fell $1.2 billion in October, the fastest rate of decline in 14 years, pulled down by a big drop in nonrevolving credit, the Federal Reserve reported on Thursday...

Consumer credit fell at a 0.6 percent annual rate in October, the biggest decline since a 0.96-percent drop in October 1992, the Fed said.

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