Central Banks: ECB and BoE

Review of Apr 10 meeting: BoE cuts 25bp and ECB on hold

Thu, Apr 10 2008, 15:11 GMT
by Marina Schiaffino

FXstreet.com


ECB and BoEThe Bank of England has decided to lower its official bank rate by 25 basis points to 5.00% after their monthly Policy Meeting. On the other hand, the European Central Bank Monetary Policy Committee has decided to keep interest rates on hold at 4%.

The reaction of the currencies after theses decisions didn't take long. Euro’s rally from 1.5510 continues, and it has reached a fresh all time high at 1.5913, and some analysts think that the rally might continue.

Check the effect that the meetings have over the pairs in our Rates and Charts Section or compare the movements of the different banks in our World Interest Rates Table.

In-Depth Analysis

Related News

Analysts' comments

  • · Howard Archer, chief economist at Global Insight:
    "By highlighting the particularly high uncertainties surrounding the economic outlook and acknowledging that financial market turmoil may last longer than initially expected, the ECB is leaving the door open to change tack quickly if circumstances warrant it." - Thomson Financial News
  • · Jennifer McKeown, European economist at Capital Economics:
    "With inflation hitting a new series-high of 3.5 percent in March and inflation expectations still at high levels, we doubt that the Bank (ECB) will be ready to signal rate cuts just yet." - Thomson Financial News
  • · Andrew Smith, chief economist at KPMG:
    "The MPC has decided that the downside risks to growth – and the consequences of underestimating them – outweigh to upside risks to inflation. However, the medicine may not get through to the patient. Even if money market rates fall in tandem, which is questionable, the cut may not be reflected in mortgage and commercial loan rates as lenders seek to expand margins and reduce credit supply. With the impact of monetary policy now blunted, rates will ultimately have to fall further to achieve the same result. Rates are heading to 4pc over the next 12 months." - Telegraph
  • · Trevor Williams, chief economist at Lloyds TSB Corporate Markets:
    "This decision must have been one of the toughest the Monetary Policy Committee (MPC) has faced for a while. It will be fascinating to see just how close the vote was, when the minutes are published later this month. If the MPC had kept rates on hold, it would have left the economy exposed to a slowdown. But by cutting rates, it has left inflation free to rise even further beyond its target. In the end, it was probably the stream of economic data published in recent days that tipped the balance in favour of a cut. The Bank of England's own report on credit conditions was anything but upbeat, predicting that credit is set to become both scarcer and costlier. There are some who believe that rates could fall further still, but the likelihood is that today's cut will be the last we will see this year, unless the economic situation deteriorates further." - Telegraph

Published on  Fri, Apr 11 2008, 09:03 GMT

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