Central Bank holds the discount rate

“We won’t give an inch” – under such a slogan, the European Central Bank left interest rates on loans at around 4%, despite the increasing pressure of European governments. They demand lower rates in order to stimulate the economy of the euro area. But the department of Jean-Claude Trichet insists that it is now more important to control accelerated inflation. The chairman of the ECB says:

“We do not give guarantees now what the basic rates for loans will be in the future. We never, as you know, never do this. This is the basis of our monetary policy. And the second: we always do everything necessary as part of our duties to maintain price stability in the medium term. “

The ECB recognizes that the growth of the euro area economy is slowing down: according to his forecast, up to 1.7% of GDP this year. But at the same time, the annual inflation forecast was raised to a record 2.9%. So, analysts concluded that the ECB does not plan to lower the refinancing rate – and the dollar rushed up, crossed the line at $ 1.53 and went further.

High euro rates make this currency attractive to speculators, they sell dollars and buy euros, as well as oil. Oil prices have reached $ 106 per barrel.

All this puts European exporters in an extremely difficult position. Their goods on the world market are losing attractiveness due to the strong euro, and transportation costs are rising due to expensive oil. Meanwhile, export is the basis of the economies of European countries such as Germany, France or Italy.

This post is also available in: English Русский (Russian)

Related Articles

Leave a Reply

Check Also
Back to top button