We use cookies to provide you with a better experience. If you continue to use this site, we'll assume you're happy with this. Alternatively, click here to find out how to manage these cookies

hide cookie message
RSS FeedFinancial Planning

ECB to raise interest rates


European bank expected to announce quarter-point increase

Article comments

Interest rates are set to rise across Europe from Thursday as the central bank makes a move on monetary policy.

The European Central Bank (ECB) has made no secret of its plan to raise the base rate more than once from its record low 1.0 percent but precise timing on official alterations remain the subject of speculation.

With so much instability in the euro zone of late, the bank has clearly marked its course on monetary policy and a first rise in interest rates since July 2008 is now widely anticipated on Thursday.

The policy making governing council started its meeting at 8 am British time. Its rate decision -- due at 12:45 pm British time -- will come less than 24 hours after Portugal announced it was seeking European Union support, a decision long expected by financial markets.

Lisbon's announcement has not changed market expectations for a rise in rates but ECB president Jean-Claude Trichet's news conference at 1:30 pm will be eyed for signs markets are still justified in expecting more than one further move this year.

For months the central bank has been privately pushing Lisbon to accept assistance and the fact it has finally happened may free the ECB to take a firmer line on the budding inflationary risk.

The ECB is concerned that firm oil prices -- near two and a half-year highs -- could boost inflation expectations and financial markets are pricing in two further quarter-point rises in interest rates this year to follow a move on Thursday.

With Greece, Ireland and Portugal all being forced to rely on international bailouts and struggling to generate growth, the rate hike will carry risks. But the central bank believes it can tighten policy slowly enough to avoid doing serious damage.

It feels re-establishing its inflation-fighting credibility is more important to avert an upward spiral of prices and wages. Euro zone inflation rose to 2.6 percent last month, above the ECB's medium-term target of just below 2.0 percent.

Share:

Recommended Articles

Comments

ECB to raise interest rates
Financial Planning

Could CFOs do more to boost shareholder value?

Could CFOs do more to boost shareholder value?

Working capital improvements start to pay off, but more could be donemore ..


Amazon slashes Fire Phone price ahead of iPhone 6 launch

Amazon today slashed the price of its three-month-old Fire Phone to 99 cents, an obvious bid to boost slow sales.more ..

Betfair mobile revenues spike during 'record' quarter

App use grows by 162 percent during World Cup periodmore ..

Samsung acquires cloud printing company PrinterOn

The acquisition aims to boost Samsung's business-to-business mobile offeringsmore ..

Can finance rise to the challenge of major transformation?

Outdated finance processes, systems and competencies leave too many questions unansweredmore ..

Budget: What business wants

CFOs are keen for the chancellor to avoid any uncertaintymore ..

Send to a friend

Email this article to a friend or colleague:


PLEASE NOTE: Your name is used only to let the recipient know who sent the story, and in case of transmission error. Both your name and the recipient's name and address will not be used for any other purpose.



In Depth
Can finance rise to the challenge of major transformation?

Can finance rise to the challenge of major transformation?

Outdated finance processes, systems and competencies leave too many questions unanswered more ..

In Depth
Interim CFO or consultant? The pros and cons

Interim CFO or consultant? The pros and cons

Ed Harding offers an insight into the life of an interim CFO and the advantages in driving transformation more ..

Advertisement

* *