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Central Banks: ECB and BoE

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Review of May 8 meeting: ECB and BoE on hold

Fri, May 9 2008, 08:51 GMT
by Marina Schiaffino

FXstreet.com

The European Central Bank (ECB) has left its interest rate on hold at 4% as markets originally expected. According to the ECB president, Jean Claude Trichet, inflation will moderate its growing pace gradually in 2008, although upside risks to price stability will remain over the medium term. With that outlook the Bank will work to anchor CPI expectations.

Euro Zone's economy, according to Trichet, is showing signs of ongoing growth, although its pace has moderated, industrial activity has weakened and consumer sentiment has gone through substantial deterioration, anyway, Euro Zone's economy is based upon sound fundamentals, and does not suffer major disbalances.

Following a similar pattern, the Bank of England (BoE) left rates unchanged at 5%, which was also expected by many analysts before the weak economic data released this week. No statement was released and markets will look into the minutes to be released on May 21st for details including vote split.

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.

• · Read the official statement at BoE
• · Read the Monetary policy decisions at ECB
• · Read Jean-Claude Trichet's Introductory statement at ECB
• · Read the full BOE, ECB and Trichet Speech Live coverage
  
  

In-Depth Analysis

• · Australian Dollar special report - ECB and BoE on hold for longer than consensus by FxMax
• · Daily FX Report - Trichet said inflation remains his top concern by Varengold Wertpapierhandelsbank AG
• · FX & Money Markets Daily - Trichet supported the EUR by Jyske Bank
• · Forex Analysis on Majors - ECB and BoE have announced yesterday the interest rate by Forex Ltd
• · Daily Market Briefing - Hawkish Outlook From ECB's Trichet Turns The Euro From Early Losses by FXCM
• · Daily Forex Outlook - ECB and BoE hold in attempt to balance inflation and growth by Easy Forex
• · European and US summary - ECB & BoE Unchanged by Forexnews.com
• · After the ECB meeting: Hawks spread wings by X-Trade Brokers, XTB
• · Mid-Day Forex Technical Report - Euro & Sterling Recovers after ECB & BoE on Hold by ActionForex.com
• · After the ECB meeting: Hawks spread wings by X-Trade Brokers, XTB
  
  

Related News

• · Euro rebounds as euro zone interest rate outlook remains unclear (Thomson Financial News)
• · Euro strengthens after Trichet fails to soften hawkish rhetoric (Thomson Financial News)
• · Euro Hits Intraday High Above $1.5400 On Trichet Remarks (Dow Jones)
• · Trichet says current ECB rates will help control inflation UPDATE (Thomson Financial News)
• · ECB Leaves Key Policy Rate Unchanged At 4.0% (Dow Jones)
• · BoE decision heaps further financial pressure on consumers, businesses - BRC (Thomson Financial News)
• · Pound enjoys brief respite after BoE keeps interest rates on hold UPDATE (Thomson Financial News)
• · BoE keeps key Bank Rate on hold at 5.00 percent (Thomson Financial News)
  
  

Analysts' comments

• · Mitsuru Sahara, senior vice president of forex trading at Mitsubishi UFJ Bank:
  "The ECB is unlikely to lower rates as it says inflation is its top priority. And it is obvious the bank wants to increase rates. So in the short-term, the euro tends to be bought while the dollar is seen to stay weak as the Fed is unlikely to increase rates. But in the mid- to the long-term view, once the economy recovers to some extent, the U.S. will also need to increase rates as there are inflation risks. Since the U.S. has been aggressively lowering rates thus far, once signs for a rate hike emerge, the dollar may sharply rebound." - Thomson Financial News
• · Daragh Maher, senior forex strategist at Calyon:
  "Trichet's apparent intransigence has ruffled a market that had become short euro in a relatively brief period of time, and the shake-out could see the euro move higher against the dollar." - Thomson Financial News
• · James Hughes, analyst at CMC Markets:
  "There's a longer term assumption that rates will come down in London during the year with perhaps as much as 100 basis points to be seen in the months ahead, although high fuel and oil prices do mean that the threat of inflation breaking higher cannot be ignored either." - Thomson Financial News

Published on  Fri, May 9 2008, 11:01 GMT