The euro declined in trading in Europe today on growing speculation that the European Central Bank has abandoned plans to raise interest rates until the economy improves. Yesterday, ECB President Jean-Claude Trichet told the European Parliament’s economic committee that “risks to the medium-term outlook for price developments are under study in the context of the ECB staff projections that will be released early September.”
The markets immediately interpreted the comments as an indication that the ECB is reconsidering its earlier position of further interest rate increases before the end of the year. Trichet also used the occasion to admonished Eurozone officials to act more quickly to approve the July 21st agreement to provide a second bailout package to Greece.
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