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UK rate cut opens up gulf with ECB

A gulf opened up between Europe’s two largest central banks on Thursday after the Bank of England responded to the global credit squeeze by cutting interest rates while the European Central Bank indicated another increase was still on the agenda. The Bank of England cut its main interest rate by a quarter of a percentage point to 5.5%, reflecting its concern that the medium-term economic outlook had darkened in recent weeks. However, Jean-Claude Trichet, ECB president, said the ECB had not jettisoned plans to raise rates from the current 4% level, pointing to divisions among the governing council members and highlighting how far the ECB remained from considering a rate cut. Lex says it is “too easy to paint BoE governor Mervyn King as Santa Claus and Jean-Claude Trichet as the miserly Scrooge”. The simple fact is that the UK’s housing and consumption fetish has to soften and the Bank needs to let this happen.

This entry was posted by Gwen Robinson on Friday, December 7th, 2007 at 5:48 and is filed under Capital markets. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.