Lack of rate change by European Central Bank hurts euro

Posted On: May 06, 2011
A much-anticipated meeting and accompanying press conference in Finland yesterday by ECB President Jean-Claude Trichet ended with no real change in the central bank's position on interest rates. The lack of a rate increase surprised traders who were betting on tighter fiscal policy, a situation that spurred a negative run on the European currency, MarketWatch reported.

The European Central Bank, based in Frankfurt, Germany, kept its three major interest rates the same, with that of its main refinancing operations remaining at 1.25 percent, the bank stated.

According to Bloomberg, Trichet's comments implied that the bank's Governing Council would maintain current rates through June, though they would not rule out a subsequent raise, as close attention would be paid to the Eurozone's financial health. “We are never pre-committed and we can increase rates whenever we judge it appropriate," the central banker stated in the press conference.

As a result, the euro was down against the dollar 2 percent in foreign exchange trading, the largest percent decrease in nearly a year, reported Dow Jones Newswires.

Category: Industry News


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