Friday, 7 March 2008

ECB, BoE and RBNZ leave interest rates unchanged

As expected, the European Central Bank kept interest rates unchanged yesterday and continues to sound hawkish. Reuters reports:

The European Central Bank said it left interest rates unchanged at 4 percent on Thursday to help the fight against inflation, though it unveiled higher consumer price forecasts for this year and next.

ECB staff also cut forecasts for euro zone growth but the bank's firm focus on price risks prompted analysts to push back expectations for a speedy cut to interest rates and sent the euro to a new record high against the U.S. dollar.

The Bank of England also left interest rates unchanged yesterday, as did the Reserve Bank of New Zealand, which looks like it will keep rates at a record-high 8.25 percent until late 2009.

In contrast to the stubborn fight against inflation by these central banks, the Federal Reserve is looking positively dovish. From Bloomberg:

Federal Reserve Bank of New York President Timothy Geithner said the central bank may need to keep interest rates low for "some time" if financial markets remain under stress and threaten economic growth.

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