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Central Banks: ECB and BoE

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Preview of Jun 5 meetings

Thu, Jun 5 2008, 08:26 GMT
by Marina Schiaffino

FXstreet.com


ECB and BoEECB and BoE monetary policy committees will announce today their latest monetary policy decisions. Both are expected to keep their key interest rates unchanged, taking in account the fast growing inflation driven by soaring energy prices. The ECB stands at 4% right now, while the BoE is at a higher 5%.

The Bank of England’s monetary policy committee ruled out last month two back-to-back rate cuts, a 25 basis point rate cut was approved in April, to stimulate economy, with inflation growing at a pace well above the 2.0% upper limit of the Bank’s margin for price stability.

The ECB faces a rather similar situation, although in this case interest rates have been steady at 4% since June 2007, the odds for a rate cut are minimal. The OECD, in its economic outlook considers the Euro Zone’s monetary policy as finely balanced between upside risks to inflation and downside risks to growth.

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. And remember that you can attend to our special live coverage: "BoE, ECB and Trichet's Speech Live Coverage with Dr. S. Sivaraman" on Thursday June 5, at 10:45GMT, both from FXstreet.com or from the proper event in the Economic Calendar.

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Analysts' comments

  • · Holger Schmieding, economist at Bank of America:
    "We consider any talk about a possible ECB rate hike in late 2008 as premature to put it mildly. We would need to see a convincing recovery of the euro zone economy from its imminent slowdown first." - Dow Jones
  • · James Knightley, strategist at ING Financial Markets:
    "Inflation pressures remain the main concern for the BOE in the near-term and will certainly keep the BOE on hold tomorrow. However, with the manufacturing PMI showing no growth and the construction and service sector PMIs in contraction territory, the recession risks are intensifying." - Dow Jones
  • · Michael Woolfolk, economist at Bank of New York:
    "While a positive surprise to Friday's payrolls appears increasingly likely, there is a understandable element of caution ahead of tomorrow's ECB and BOE meetings. Once this event risk has passed, expect the dollar to gain ground on the recent positive US data and in anticipation of a positive surprise to non-farm payrolls." - Thomson Financial News


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