For the 24th month in a row, the European Central Bank (ECB) has decided to keep its main interest rate unchanged at 2% even though growth is weak in the euro-zone economy.
Many politicians have been calling for the bank to cut to the rate because the growth outlook is falling for the twelve countries that use the euro as their currency.
The ECB cut its 2005 growth projection to 1.4 percent from about 1.6 percent previously and its 2006 estimate to 2 percent from 2.1 percent, ECB President Jean-Claude Trichet said at a briefing in Frankfurt.
The bank also pared its inflation forecast for 2006 to 1.5 percent from 1.6 percent, the person said. It would be the first time since 1999 the ECB managed to bring the rate below its 2 percent limit. The forecast for 2005 was raised to 2 percent from about 1.9 percent.
Business confidence has been on the decline as manufacturing has slumped in the euro-zone. This is another reason that politicians like Italian Prime Minister Silvio Berlusconi have called on the bank to take steps to boost growth.
“We trust also that improving confidence, particularly in the consumer constituency, would be a very important means to foster growth and job creation,” said Trichet. “They have, I would say, some doubt. You can trust us. Perhaps it is time to consume. Because we are credible.”
Trichet has indicated that he would like to see eurozone rates go up when the economic conditions in the euro-zone can better accommodate them. Now is apparently just not the time.
Chris is a staff writer for Murdok. Visit Murdok for the latest ebusiness news.
