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ECB resists calls to lower rates

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by Brian Turner
ECB resists calls to lower rates

European Central Bank decided on Thursday to keep its main interest rate at 2 percent.

This is despite calls from the German economics and labour minister, several Italian ministers, the Organization for Economic Co-operation and Development (OECD), and from Germany’s Ifo Institute to lower interest rates, in order to stimulate economic growth in the eurozone.

The rate has held at that level for 2 full years now.

The calls for lower rates came after reports that German business confidence is down and on downward revisions for growth in the eurozone this year and next.

The OECD said that the rate should be cut by 50 basis points.

Even amid these pleas for lower rates, however, the ECB’s decision was expected in a climate that includes the French and Dutch rejections of the European Union constitution, and most analysts expect that when the ECB finally does make a change in the interest rates the revision will be in an upward direction.

This is especially so in light of the fact that the president of the ECB, Jean-Claude Trichet, has indicated that he wants to see rates in the eurozone rise as soon as conditions will allow it. His position is that interest rate cuts would actually undermine growth.

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News posted: June 2, 2005

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