Skip to content

European Central Bank may hold rates

When the governors of the European Central Bank come together on Thursday, they likely will make no change in the key interest rate. Many economists believe that too many uncertainties in credit markets and other economic indicators will require that the bank keep rates steady.

Currently, the rate is set at 4.0 percent. This rate, set for main refinancing operations has been in effect since 13 June 2007. Without a rate change on Thursday, this will mark the first time that the rate has been left unchanged over the last two years. Additionally, each rate change thus far over that period has been a rising of the rate. A stop here would be first in several years.

Economists believe that it is nearly essential that the ECB holds rates at the steady 4.0 percent. The key factors behind this lock in the rate include inflation and slowing growth around the market. Credit markets remain a large problem for most economists. The uncertainty there has many concerned.

Some central banks do plan to lower the costs associated with borrowing funds, in the hopes of keeping their heads above the US housing crisis. The ECB is taking note of the likelihood that the US Federal Reserve will also cut interest rates when it comes together for the next scheduled meeting on 30 January.

When the governors meet on 10 January, governors from the now active Malta and Cyprus will also attend, for the first time. The meeting will happen in Frankfurt with all Governing Council present. After the meeting, there will be a press conference to outline the happenings of the meeting. The scheduled press conference is said to start about 2:30 pm CET. Both the European Central Bank President and the Vice President will be available for questions from journalists at that time.

Related