ECB, Bank of England Hold Line on Interest Rates

The European Central Bank and the Bank of England both announced that benchmark lending rates for both jurisdictions will remain at 1 percent and 0.5 percent respectively. The news comes just one day after the US Federal Reserve confirmed that it will buy $600 billion worth of government bonds over the next eight months in a second round of quantitative easing.

The ECB pointed to recent indicators suggesting the Eurozone economy is improving and has no current plans to resort to additional spending.

“The ECB is likely to stand on the opposite side of the fence to the Fed and prepare the market for a continued withdrawal of its support measures,” said Citigroup economist Juergen Michels. “Unless the ECB sees a risk of deflation, or there is another really severe intensification of financial market tensions, it is unlikely to change its stance.”

The Bank of England also said it has no immediate plans for further spending noting that overall growth while weaker than last quarter, is still positive. Insiders continue to suggest however, that the Bank may engage in more stimulus spending later once the planned government spending cuts come into effect.

Source: ECB Update – BBC News

Source: UK Update – BBC News

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.