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Central Banks: ECB and BoE

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Review of Jun 5 meeting: Both banks on hold

Fri, Jun 6 2008, 08:47 GMT
by Marina Schiaffino

FXstreet.com

The European Central Bank (ECB) has left its interest rate on hold at 4% as markets originally expected. ECB President Jean-Claude Trichet hawkish remarks, which were made after the decision, pulled the euro from three-week troughs versus the dollar touched in overnight trade. He signalled a July rate increase for the Euro Zone, stopping a recovery in the dollar that had started to rise.

Trichet also pointed that inflation will be growing at a very fast pace over a more protracted period in the European Monetary Union, and upside risks for price stability will remain over the medium term, however, the Euro Zone economic fundamentals remain high.

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. The Bank’s monetary policy committee has not provided any further explanation about the decision, the meeting’s minutes will be published on June 18th at 8:30 GMT.

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 BoE's statement
• · Read the ECB's statement
• · Read full Jean-Claude Trichet's Introductory statement at ECB
  
  

In-Depth Analysis

• · Central European Daily - The forint becomes vulnerable after Trichet's call for a July hike by KBC Bank
• · Daily Forex Commentary - Trichet hinted at hikes by Jyske Bank
• · Euroland: ECB in a state of heightened alertness by Danske Bank A/S
• · Daily Forex Outlook - Trichet talks rate hikes and inflation risks, Euro and Crude Oil surge by Easy Forex
  
• · Daily Forex Strategy Briefing - USD Falls on Trichet's Hawkish Comments by CMS Forex
• · European and US summary - Euro Rallied on Trichet Comments by Forexnews.com
• · Mid-Day Forex Technical Report - Euro Boosted by Possibility of a Jul Hike from ECB by ActionForex.com

Related News

• · The Bank of England maintains its Bank rate unchanged at 5.00% (FXstreet.com)
• · ECB maintains its Refi Rate on hold at 4.0% (FXstreet.com)
• · BoE took 'the wise option' by opting to keep interest rates unchanged - BRC (Thomson Financial News)
• · UK CBI says BoE had few options but to keep rates unchanged (Thomson Financial News)
• · Dollar Extends Lead Vs Rivals Despite ECB, BOE Rate Votes (Dow Jones)
• · Euro surges after ECB's Trichet hints at near-term interest rate hike (Thomson Financial News)
  
  

Analysts' comments

• · Peter Rosentreich, chief market analyst at ACM
  "The BoE MPC held rates at 5.0% as the market anticipated and released no statement accompanying statement. This decision was consistent with the previous inflation report which warned of increasing price pressure and headline CPI which hit 3.0% last month. While we don't see rates heading lower in the near term the BoE will need to keep an eye on crashing economic data especially in the housing market." - ACM
• · Neil Mellor, analyst at the Bank of New York
  "Unless euro zone inflation and money supply data come down significantly the ECB will definitely move in August, if not in July. Markets have been busying themselves to price that in." - Thomson Financial News
• · Carsten Brzeski, analyst at ING
  "For the fist time since last summer, ECB President Jean-Claude Trichet gave a clear signal regarding a possible rate hike at the next meeting. Trichet caught most analysts and market participants by surprise. According to Trichet, it was not excluded that rates would be hiked at the next meeting in July. 'It's not certain, it's possible'. There were already some members of the Governing Council who were in favor of hiking rates even today." - Dow Jones

Published on  Fri, Jun 6 2008, 09:35 GMT