Bank of England, ECB hold rates unchanged

Story link: Bank of England, ECB hold rates unchanged

The Bank of England and the European Central Bank each held interest rates steady on Thursday, sending the euro higher versus the US dollar even as the pound fell to a new all-time low versus the euro.

The Bank of England’s Monetary Policy Committee held the interest rate at 5.5 percent as had been expected by most analysts, who believe that the MPC will cut rates in February amid an economy that is showing clear signs of slowing.

At nearly 1 p.m. in New York the pound traded at 75.62p to the euro.

Meanwhile, the European Central Bank held interest rates at 4 percent, which was also anticipated by most analysts, sending the euro higher against the majority of major currencies.

The ECB’s president, Jean-Claude Trichet, issued comments after the decision that indicated that the Eurozone will not follow the example of the Bank of England and the US Federal Reserve in cutting interest rates, saying that the only options that were discussed in this month’s meeting were holding rates or raising them.

Mr. Trichet also warned that the ECB will do whatever is necessary to keep inflation under control and that pressures on inflation remain upward.

The comments from the ECB’s president came on the same day when US Federal Reserve chairman Ben Bernanke said in a speech that he is prepared to cut interest rates again in order to avoid a recession brought on by the housing and credit crises.

In early afternoon trade in New York, the dollar traded at $1.4807 to the euro and at $1.9583 to the pound, while it took ¥109.1500 to buy a dollar.