Interest Rate Updates: Bank of England cuts rate. European Central Bank and Reserve Bank of New Zealand hold rates steady.

December 6, 2007 - Forex Economic News

The Bank of England announced the decision to cut its interest rate by 0.25 percent to 5.5 percent today. "Conditions in financial markets have deteriorated and a tightening in the supply of credit" as well as signs of slowing economic growth were cited by the Bank of England’s Monetary Policy Committee as spurring the rate cut. BoE had last raised its interest rate to 5.75 percent in the beginning of July. BoE statement.

Meanwhile, the European Central Bank left its key interest rate unchanged at 4 percent. The ECB President Jean-Claude Trichet noted that signals indicate that "economic growth has continued into the fourth quarter", "employment growth has been robust "and the "unemployment rate has fallen to levels not seen for 25 years." Despite the Euros "sound" fundamentals, the ECB highlighted the concern of rising inflation and that higher inflation projections may hold for longer than expected. The ECB decided it was best to keep its current rate and "monitor very closely all developments." ECB statement.

The Reserve Bank of New Zealand also left its official cash rate unchanged at 8.25 percent today, noting that rising oil and global food prices would likely lead to higher inflation. In the policy statement, Reserve Bank Governor Alan Bollard remarked that "inflationary pressures have increased, and interest rates are now likely to remain around current levels for longer than previously thought." RBNZ statement.

Tags: BOE, ECB, inflation, interest rate cut, Interest Rates, Reserve Bank of New Zealand, RBNZ, Trichnet, Bank of England, Alan Bollard ---------------- Blog index