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Central Banks: ECB and BoE

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Preview of Sep 4 meetings

Wed, Sep 3 2008, 14:44 GMT
by Marina Schiaffino

FXstreet.com

The BoE as well as the ECB's monetary policy committees will, most likely, keep interest rates on hold, amid fears of the economy worsening over the next quarters, which could put pressure on the Banks to cut rates over the coming months.

On one hand, the Bank of England is expected to maintain its main interest rate at the current 5.0% although British economy seems to be going through one of the hardest periods since the second world war. GDP growth has come to a standstill in the second quarter with the domestic demand contracting for the second consecutive quarter.

On the other hand the ECB is facing an inflation, which according to Trichet is the main goal of the Bank’s monetary policy, that remains running way too fast at 4.1% year on year in July. Still, unlike the Bank of England, analysts do not expect any rate cut on the ECB for the rest of the year, on the contrary, Papademos, ECB’s vicepresident, recently hinted at the possibility of a further rate hike, should inflation produce a wage-price spiral.

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.

• · ECB homepage
• · BoE homepage
  
  

In-Depth Analysis

• · Daily Market Briefing - Euro: ECB President Trichet's Comments Could Shake Up the Markets, Expected to Leave Rates At 4.25% by FXCM
• · Daily Forex Strategy Briefing - EUR/USD at Important Support ahead of Trichet by CMS Forex
• · London Bullion Report - Gold consolidates, platinum under pressure ahead of rate news by The Bullion Desk
• · Forex Trading Strategies - Today's ECB meeting: a turning point or an accelerator for the EUR decline? by Saxo Bank
• · Daily Forex Commentary - Three interest rate meetings today! by Jyske Bank
• · ECB: Preview of meeting on September 4 by Danske Bank A/S
• · Weekly Analysis - Eye on Storm and Central Banks by Finotec Group Inc.
• · Weekly Market View - The Central Banks' Interest Rate Decisions And The Big Non-Farm Payrolls by FXstreet.com
• · Weekly Focus - Two central bank schools by Danske Bank A/S
  
  

Related News

• · Bank of England set to hold rates steady at 5 pct (Thomson Financial News)
• · Swiss franc ticks up ahead of ECB decision (Thomson Financial News)
• · Dollar off 8-month high vs euro, awaits ECB (Thomson Financial News)
• · UK gilts, rate futures edge higher ahead of BoE (Thomson Financial News)
• · Sterling bounces from new lows after UK data; eyes on MPC (Thomson Financial News)
• · Central Banks will keep rates unchanged tomorrow (FXstreet.com)
  
  

Analysts' comments

• · George Buckley, chief UK economist at Deutsche Bank
  "Any doubts about the Bank of England's intentions at tomorrow's policy meeting should have been removed by the latest service sector PMI." - Reuters
• · Elwin de Groot, economist at Rabobank
  "Last week's comments were probably intended to tone down market expectations of rate cuts early next year rather than being a serious threat of another rate hike coming up soon. The most likely scenario is for the ECB to be on hold for the remainder of this year, and then only start monetary easing in 2009. Inflation is the key word here and with a headline reading at 3.8 percent, euro zone inflation simply remains too elevated for the ECB to focus on downside risks to growth." - Reuters
• · Peter Rosentreich, chief market analyst at ACM
  "Market will focus on ECB Jean-Claude Trichet news conference after Thursday's policy meeting, at which the ECB is expected to leave interest rates unchanged at 4.25%. With oil prices falling sharply, investors will look for signs that Trichet's anti-inflation stance is cooling." - ACM
• · Howard Archer, chief economist at Global Insight
  "The upward revision to the euro-zone purchasing managers' survey for August does not hide the fact that this is still a very weak report. (This) maintains concern that the euro-zone economy is in serious danger of recession. Meanwhile, the easing back in the prices indices will be welcomed by the ECB, although the bank remains unlikely to cut interest rates until early 2009 given current elevated inflation levels and still significant medium-term inflationary risks." - Dow Jones
  
  

Published on  Thu, Sep 4 2008, 07:48 GMT