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ECB keeps eurozone interest rate at 4%
10 Sep '07
2 min read
The European Central Bank (ECB) has decided to keep its key interest rate at 4% while taking stock of the full economic disruption of tighter lending that has emerged owing to a collapse of the US sub-prime mortgage market.
The Governing Council of the ECB agreed at their monthly meeting on Thursday (6 September) that more data is needed to see whether the global financial-market turmoil will slow economic growth before deciding on further interest-rate increases.
"Financial-market volatility and reappraisal of risks over recent weeks have led to an increase in uncertainty,'' ECB president Jean-Claude Trichet said at a press conference in Frankfurt after the meeting.
"Given this high level of uncertainty it's appropriate to gather additional information before drawing conclusions'' on interest rates, said Mr Trichet, adding that the decision was unanimous.
He explained that the fundamentals of the 13-nation eurozone economy remained strong but the recent turmoil on financial markets meant policymakers needed to proceed with caution.
The announcement came shortly after the Bank of England also decided to keep its benchmark rate steady on 5.75%, while Australia, Brazil and Canada each froze their rates earlier this week.
Central banks worldwide are refraining from raising rates as they assess how the credit squeeze will affect economic growth.
The ECB council had signalled that an increase of 0.25% was very likely after it met last month, but turmoil in the international money markets - which was kicked off by concerns over mortgage defaults in the US lending market - lead the bank to reassess the situation and wait for more information.
The Governing Council of the ECB agreed at their monthly meeting on Thursday (6 September) that more data is needed to see whether the global financial-market turmoil will slow economic growth before deciding on further interest-rate increases.
"Financial-market volatility and reappraisal of risks over recent weeks have led to an increase in uncertainty,'' ECB president Jean-Claude Trichet said at a press conference in Frankfurt after the meeting.
"Given this high level of uncertainty it's appropriate to gather additional information before drawing conclusions'' on interest rates, said Mr Trichet, adding that the decision was unanimous.
He explained that the fundamentals of the 13-nation eurozone economy remained strong but the recent turmoil on financial markets meant policymakers needed to proceed with caution.
The announcement came shortly after the Bank of England also decided to keep its benchmark rate steady on 5.75%, while Australia, Brazil and Canada each froze their rates earlier this week.
Central banks worldwide are refraining from raising rates as they assess how the credit squeeze will affect economic growth.
The ECB council had signalled that an increase of 0.25% was very likely after it met last month, but turmoil in the international money markets - which was kicked off by concerns over mortgage defaults in the US lending market - lead the bank to reassess the situation and wait for more information.
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