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| Version 0 | Version 1 |
|---|---|
| Eurozone rates on hold at 4.25% | Eurozone rates on hold at 4.25% |
| (10 minutes later) | |
| The European Central Bank (ECB) has left interest rates unchanged at 4.25% amid faltering economic growth and rising inflation in the eurozone. | The European Central Bank (ECB) has left interest rates unchanged at 4.25% amid faltering economic growth and rising inflation in the eurozone. |
| ECB President Jean-Claude Trichet weighed up inflation of 3.8% and recent evidence that some eurozone nations are on the brink of recession. | ECB President Jean-Claude Trichet weighed up inflation of 3.8% and recent evidence that some eurozone nations are on the brink of recession. |
| Many analysts said they expect the cost of borrowing to remain at this level for the rest of the year. | Many analysts said they expect the cost of borrowing to remain at this level for the rest of the year. |
| Inflation worries forced the ECB to raise rates by 0.25% in July. | Inflation worries forced the ECB to raise rates by 0.25% in July. |
| Earlier on Thursday, the Bank of England left the cost of borrowing in the UK unchanged at 5%. | Earlier on Thursday, the Bank of England left the cost of borrowing in the UK unchanged at 5%. |
| Inflation threat | Inflation threat |
| The key concern for ECB policymakers is how to control inflation, which remains well above its 2% target due to rising food and energy prices. The bank is also concerned that wage demands could further fuel inflation, analysts said. | |
| Inflationary pressures are doubtless keeping the minds of the central bankers highly focused James Hughes, CMC Markets | Inflationary pressures are doubtless keeping the minds of the central bankers highly focused James Hughes, CMC Markets |
| But Mr Trichet also faces the prospect of economic growth in the region grinding to a halt. | But Mr Trichet also faces the prospect of economic growth in the region grinding to a halt. |
| Figures from the European Union showed the eurozone economy shrank 0.2% in the second quarter of the year compared with the previous quarter. | Figures from the European Union showed the eurozone economy shrank 0.2% in the second quarter of the year compared with the previous quarter. |
| There are increasing fears that the region could be entering a recession - or two successive quarters of contraction. | There are increasing fears that the region could be entering a recession - or two successive quarters of contraction. |
| The OECD recently said that it expected growth in the three largest eurozone economies - Germany, France, and Italy - to be broadly flat for the rest of the year. | The OECD recently said that it expected growth in the three largest eurozone economies - Germany, France, and Italy - to be broadly flat for the rest of the year. |
| Analysts said policymakers around the world were grappling with the threat of inflation and stagnating growth. | Analysts said policymakers around the world were grappling with the threat of inflation and stagnating growth. |
| "Inflationary pressures are doubtless keeping the minds of the central bankers highly focused but we do need to bear in mind that oil prices have fallen dramatically over the last six to eight weeks," said CMC Markets analyst James Hughes. | "Inflationary pressures are doubtless keeping the minds of the central bankers highly focused but we do need to bear in mind that oil prices have fallen dramatically over the last six to eight weeks," said CMC Markets analyst James Hughes. |
| Sweden's central bank raised borrowing costs on Thursday for the third time this year to tackle rising inflation. | Sweden's central bank raised borrowing costs on Thursday for the third time this year to tackle rising inflation. |
| Rates rose by a quarter of a percentage point to 4.75%, despite economic growth coming to a standstill in the second quarter. | Rates rose by a quarter of a percentage point to 4.75%, despite economic growth coming to a standstill in the second quarter. |
| Earlier in the day, Indonesia's central bank increased rates to 9.25% to combat double-digit inflation. | Earlier in the day, Indonesia's central bank increased rates to 9.25% to combat double-digit inflation. |
| However, some analysts believe these rate hikes may be the last in 2008 as price pressures may have peaked. | However, some analysts believe these rate hikes may be the last in 2008 as price pressures may have peaked. |
| "You could say that global tightening is coming to an end. Most central banks will use the excuse of slightly weaker growth and a turning point in inflation to stop raising rates," said Robert Prior-Wandesforde, an economist at HSBC in Singapore. | "You could say that global tightening is coming to an end. Most central banks will use the excuse of slightly weaker growth and a turning point in inflation to stop raising rates," said Robert Prior-Wandesforde, an economist at HSBC in Singapore. |