The scale of the credit squeeze on Thursday forced European central bankers to hold interest rate rises that had seemed all but certain a month ago as they recognised the potential for the turmoil to hit households and companies. The ECB left its main interest rate unchanged at 4 per cent. For the first time in eight years, the Bank of England issued a statement alongside its decision to maintain the official rate at 5.75 per cent, indicating lower short-term expectations for inflation and a commitment to monitor closely “credit spreads and the quantities of credit extended”. Lex says that by making clear that the ECB’s “generous tactics” in the money markets will be accompanied by a disciplined stance on inflation, Jean-Claude Trichet might be seeking to distinguish the ECB from what investors expect of the Fed.

This entry was posted by Gwen Robinson on Friday, September 7th, 2007 at 5:50 and is filed under Capital markets. Tagged with bank of england, ecb. Edit this entry.