European Central Bank reversing trend

Marketplace Staff Dec 6, 2007
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European Central Bank reversing trend

Marketplace Staff Dec 6, 2007
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TEXT OF STORY

Doug Krizner: This morning, both the Bank of England and the European Central Bank are meeting on interest rates. British rates look to be headed lower, but there’s a different outlook for the Eurozone. Our European correspondent is Megan Williams.


Megan Williams: As Europe weathers the storm caused by the U.S. subprime mortgage crisis, growing inflation and a record-high euro, no one’s surprised by its central bank’s decision to keep interest rates at 4 percent.

European consumer confidence, along with the housing market, is slipping fast. By reversing its previous trend of slowly hiking interest rates, the European Central Bank hopes to fuel the economy by making borrowing money easier.

E.U. expert Francis X. Rocca says even that has its risks:

Francis X. Rocca: European leaders are agonizing about the high-value euro and its impact on exports. On the other hand, the inflation rate hasn’t been this high in Eurozone in over six years. And when you lower interest rates, you really risk aggravating that.

This week, Canada, whose dollar is now worth about the same as the U.S., surprised analysts by cutting its rate by a quarter point to 4.25. The U.S. is set to review its rates early next week.

I’m Megan Williams for Marketplace.

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