• Home >
• News >
• Forex News

• Send
• Print
• Add To

ECB and BoE will, most likely, keep rates on hold tomorrow

Wed, Jun 4 2008, 14:24 GMT
http://www.fxstreet.com

FXstreet.com (Barcelona) – On Thursday, the ECB and the BoE monetary policy committees will announce 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 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.

Oil prices have risen higher in the meantime and year on year inflation has accelerated to 3.0% in April, from 2.5% in March, and it could reach a 3.6% yearly growing pace. British economy, on the other side is slowing down sharply, GDP has grown 0.4% in the first quarter of the month, down from 0.6% in the last quarter of 2007, and private consumption is decreasing notoriously. In this context the BoE will probably leave rates on hold at 5%.

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.

Inflation is running art a 3.6% year on year rate, the fastest pace in 12 years, while but the area´s GDP is expected to grow below 2% year on year for the next quarters, in this context, and with the Bank repeating their commitment to keep inflation anchored in the medium term, as their main goal, we can advance that the ECB’s key interest rate will remain at 4% at least for one more month.

• EUR/USD
• USD/JPY
• GBP/USD
• USD/CHF