Forex Roundup - ECB, BOE, RBNZ hold interest rates steady. | CountingPips Forex & Currency Trading Blog

June 5, 2008 - Forex Economic News

Forex Roundup - ECB, BOE, RBNZ hold interest rates steady.

News out of Europe today focused on the Bank of England and the European Central Bank interest rate decisions and out of Asia, the Reserve Bank of New Zealand announced its own rate decision. The BOE decided hold its interest rate unchanged from at 5.00 percent. This followed an interest rate cut by the BOE of 0.25 percent in both February and April of this year. The minutes of the meeting will be published on June 18th.

The European Central Bank also left its interest rate steady today at 4.00 percent and in line with the forecasted market expectations. Jean-Claude Trichet, the President of the ECB, cited in his press conference today that inflation concerns remain the driving reason behind keeping the interest rate unchanged as he said, "Inflation rates have risen significantly since the autumn of last year, owing mainly to strong increases in energy and food prices. HICP inflation is now expected to remain high for a more protracted period than previously thought.". Trichet also went on to say that the ECB expects the eurozone to have real GDP growth over 2008 and that the "fundamentals of the euro area economy remain sound, and the euro area does not suffer from major imbalances. Against this background, we expect investment growth in the euro area to provide ongoing support to economic activity."

Overnight, the Reserve Bank of New Zealand also announced its decision to leave its official cash rate unchanged at 8.25 percent but said that the rate will probably be lowered later this year. The New Zealand economy is seeing weakening economic growth and fighting high inflation rates that have risen above the governments preferred target rates. The RBNZ's official cash rate has been at 8.25 percent after a rate increase in July of 2007. Commenting in the report accompanying the rate announcement, Reserve Bank Governor Alan Bollard said, "The outlook for economic activity is now weaker than in our previous Statement. We project little GDP growth over 2008, and only a modest recovery thereafter, largely reflecting a weaker household sector", and that, "Consistent with the Policy Targets Agreement, the Bank’s focus will remain on medium-term inflation. Provided the economy evolves in line with our projection, we are now likely to be in a position to lower the OCR later this year, which is sooner than previously envisaged."

Tags: interest rates, cash rate, boe, ecb, rbnz

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