ECB Leaves Benchmark Rate Unchanged

    May 3, 2005
    Chris Crum

The European Central Bank has left its benchmark rate at 2%, marking two straight years that the rate has been unchanged.

This is no surprise to economists, as most had no doubt that rates would be left alone.

“No-one expects the bank to deliver a hike any time this year, with US growth grinding lower and eurozone growth on the brink of stagnation,” wrote WestLB analysts.

“Doubts about the economy will increase in coming weeks,” said HVB Group chief economist, Joerg Kraemer. “The ECB won’t raise rates if leading indicators continue to fall.”

BBC News points out:

Some observers are even beginning to see the possibility of a cut in rates later in 2005, despite the ECB’s famous unwillingness to move.

But rising oil prices – one cause of the weak growth in Europe – also mean the risk of rising prices, which would normally require rates to rise in response.

European business confidence has been low as a result of oil prices and job concerns.

The United States raised its benchmark rate yesterday to 3% and hinted at more increases.

Chris is a staff writer for WebProNews. Visit WebProNews for the latest ebusiness news.