Friday, 3 July 2009

ECB keeps interest rate unchanged as eurozone and US unemployment rates rise

The ECB kept interest rates unchanged on Thursday, and will probably keep rates low for some time to come. From Bloomberg:

Jean-Claude Trichet signaled the European Central Bank will keep interest rates at a record low for the coming months as officials deploy new tools to fight the worst recession since World War II.

“The current rates are appropriate,” Trichet said at a press conference in Luxembourg after the ECB left its benchmark rate at a record low of 1 percent. At the same time, he refused to rule out the option of further cuts, saying “we did not decide today that this was the lowest level we would attain under any circumstances.”

The ECB's stand appears justified, based on data reported on Thursday.

Europe’s unemployment rate rose to the highest in a decade in May as airlines, banks and builders cut jobs to survive a recession that’s led to soaring losses and fueled bankruptcies.

Unemployment in the 16-member euro region increased to 9.5 percent from a revised 9.3 percent in April, the European Union statistics office in Luxembourg said today. That’s the highest since May 1999 and exceeded the median forecast of 9.4 percent from a Bloomberg survey of 29 economists. A separate report showed European producer prices fell by a record 5.8 percent in May from a year earlier.

Scant consolation to Europeans, perhaps, but the US unemployment rate appears to have caught up with European levels.

Payrolls declined by 467,000 last month following a 322,000 drop in May, according to Labor Department figures released today in Washington. The jobless rate rose to 9.5 percent, the highest since August 1983, from 9.4 percent.

But there are still signs that the US economy has begun to turn around.

The payrolls decline in June was still well below the peak of 741,000 jobs lost in January, suggesting the economy remains on track for a recovery later this year, economists said...

A gain in orders placed at U.S. factories reinforced signs that the economy may be stabilizing. Factory orders climbed for a third time in four months in May on rising demand for aircraft, machinery and computers, a separate report from the Commerce Department showed today. Bookings gained 1.2 percent, the most since June 2008, after a 0.5 percent increase in April...

The number of Americans filing claims for unemployment benefits last week fell in line with forecasts, Labor also said, indicating firings remain elevated. Initial jobless claims dropped by 16,000 to 614,000 in the week ended June 27, from a revised 630,000 the week before.

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