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| Version 2 | Version 3 |
|---|---|
| Euro rates at 4% in summer pause | Euro rates at 4% in summer pause |
| (about 13 hours later) | |
| The European Central Bank (ECB) has given the markets a reprieve by leaving eurozone interest rates on hold at 4% for the second month in a row. | The European Central Bank (ECB) has given the markets a reprieve by leaving eurozone interest rates on hold at 4% for the second month in a row. |
| The move should alleviate some of the fears over the economic impact of the sharp rise in the cost of borrowing over the past two years. | The move should alleviate some of the fears over the economic impact of the sharp rise in the cost of borrowing over the past two years. |
| The decision came after policy makers conducted the monthly meeting by telephone during their summer recess. | The decision came after policy makers conducted the monthly meeting by telephone during their summer recess. |
| Economists still believe rates will rise further by the end of the year. | Economists still believe rates will rise further by the end of the year. |
| The pause in rate rises, echoed in the UK, should come as a relief to homeowners, consumers and businesses feeling the squeeze from the higher cost of borrowing. | The pause in rate rises, echoed in the UK, should come as a relief to homeowners, consumers and businesses feeling the squeeze from the higher cost of borrowing. |
| Exporters will also be grateful as the strength of the euro against the dollar has been threatening to bite into their profits. But it is thought that the reprieve will be temporary. | |
| Expectations that euro rates will climb again either in September or October were reinforced by ECB President Jean-Claude Trichet, who vowed "strong vigilance" on inflation and other economic data - a signal that, in the past, has meant further rises. | Expectations that euro rates will climb again either in September or October were reinforced by ECB President Jean-Claude Trichet, who vowed "strong vigilance" on inflation and other economic data - a signal that, in the past, has meant further rises. |
| But, in an unexpected news conference, he refused to be drawn on the future direction of interest rates. Typically, such conferences are not scheduled after the August rate decision. | But, in an unexpected news conference, he refused to be drawn on the future direction of interest rates. Typically, such conferences are not scheduled after the August rate decision. |
| Repricing of risk | Repricing of risk |
| Of the current turmoil in the financial markets, Mr Trichet observed that we are seeing a "return to normal in the price of risk". | Of the current turmoil in the financial markets, Mr Trichet observed that we are seeing a "return to normal in the price of risk". |
| But he added: "We think this evolution in financial markets deserves attention and we will continue to observe shifts in market sentiment." | But he added: "We think this evolution in financial markets deserves attention and we will continue to observe shifts in market sentiment." |
| Nervousness of risky assets, like shares, has been brought about by fears that the slump in the US sub-prime mortgage sector is the beginning of a wider credit problem driven by the end of cheap debt that has, over the past few years, been used to fund corporate expansion. | Nervousness of risky assets, like shares, has been brought about by fears that the slump in the US sub-prime mortgage sector is the beginning of a wider credit problem driven by the end of cheap debt that has, over the past few years, been used to fund corporate expansion. |
| The Bank of England's rate-setting body also kept interest rates on the hold in the UK at their current level of 5.75%. | The Bank of England's rate-setting body also kept interest rates on the hold in the UK at their current level of 5.75%. |
| But there too, borrowing costs are widely expected to rise again to 6% before the end of the year. | But there too, borrowing costs are widely expected to rise again to 6% before the end of the year. |