Eurozone interest rate frozen
Thursday, 04 Sep 2008 16:31
European Central Bank holds interest rate at 4.25 per cent
The European Central Bank (ECB) has held the interest rate at 4.25 per cent this month as the eurozone struggles with high inflation.
Inflation is a concern across the EU and the bank raised the borrowing rate in July in an effort to keep prices down.
However, most European economies are also slowing and in some cases contracting, so the raising the rate any further risks deepening the economic gloom.
According to Eurostat's first estimate, GDP in the eurozone contracted by 0.2 per cent in the second quarter of 2008, mainly due to the shrinking economies of Germany and France.
Inflation in the euro area stands at 3.8 per cent and the ECB does not expect this to moderate until 2009.
The ECB's president Jean-Claude Trichet made it clear in a statement that the goal of the central bank is to keep inflation in check.
"In full accordance with our mandate, we emphasise that maintaining price stability in the medium term is our primary objective and that we are resolute in our determination to keep medium and long-term inflation expectations firmly anchored in line with price stability," he told reporters at a press conference following the decision.
The Bank of England also held
interest rates steady today and was faced with the same dilemma: how to keep inflation at bay while supporting an ailing economy?
The Bank has kept the interest rate at five per cent since April but analysts believe a rate cut is likely before the end of the year.