Eurozone rates on hold at 4.25%

Posted by admin on 5 October, 2008 under Business news | Be the First to Comment

The European Central Bank has kept its key interest rate on hold at 4.25%, resisting pressure for a rate cut.

Eurozone inflation fell to 3.6% in September, but it is still well above the 2% target.

ECB president Jean-Claude Trichet said that a quarter-point interest rate cut had been considered, but there had been a unanimous vote against it.

He added that the risk to economic growth had increased and that economic activity was weakening.

Mr Trichet said that the effects of the banking crisis had yet to feed through into economic data.

But he also said it was important for the ECB to keep inflationary expectations down.

“With the weakening of demand, upside risks to price stability have diminished somewhat but they have not disappeared,” he said.

Recession

Last week, Ireland became the eurozone’s first economy to be formally in recession.

There is concern that the problems facing Europe’s banks could send other economies into recession.

“In the past four days, the governments of no less than seven European countries were required to nationalise banks or guarantee the deposits of large cross-border institutions,” US economics professor Nouriel Roubini said on Wednesday.

The ECB has been lending billions of euros to its struggling banks in an attempt to ease the credit crisis.

News reported by The BBC