Eurozone, UK interest rates remain steady

Both the European Central Bank and the Bank of England chose to keep interest rates at their current levels in meetings on Thursday. Both decisions were expected, but while many analysts believe that the ECB will raise rates next month, expert opinion seems to be that the Bank of England will not change rates until later in the year. If a rate change comes in the UK, it is likely to be a downward adjustment.

In the Eurozone, interest rates remained at 2.5 percent, but some analysts expect that by the end of the year it will have risen to 3.5 percent. This expectation is based on data showing that the region’s economy is recovering and business confidence is growing. The Purchasing Managers Index was at 58.2 in March, the highest it has been since September 2000, companies have increased capital spending, and various measures indicate that economic growth in the first three months of this year is at 0.7 percent. Less optimistic data includes the fact that unemployment remains high - 9.1 percent in Germany and 8.9 percent in France - and the decline of retail sales by 0.2 percent in February.

Meanwhile, the monetary policy committee of the Bank of England voted to keep interest rates at 4.5 percent for the eighth consecutive month. Economic data in the UK has been mixed recently. The annual growth in the price of a house was at 6.2 percent in March, and the service sector is active and expanding. However, manufacturing output contracted by 0.2 percent in February compared to January and manufacturers have not been able to pass along their cost increases to consumers.

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