ECB Holds Rates at 2%

The European Central Bank held its main refinancing rate constant at 2% for the 24th consecutive month this afternoon. No real surprise here. Perhaps the most revealing comment has been: “Whether others like it or not, the ECB isn?t an activist central bank,? a view offered to the Financial Times by one Julian Jessop, economist at Capital Economics.

The FT also points out that: “the 5.5 per cent slide in the euro to $1.226 against the dollar since the ECB?s last meeting may have done some of the Bank?s work for it. The weakening of the euro is stimulative to growth in the same way a rate cut would be, and, if it persists, is likely to be an upward drag on eurozone inflation“.

We will see. The euro has had a much calmer day today, clawing back this morning most of the ground lost in hectic trading last night. It is currently going for around $1.2279 in a fairly volatile afternoon.

The – oh they’ve all gone quiet over there – European Commission seems determined to sit things out till the June Summit, while Barroso appeals for calm:.

“?What I am asking for now is that political leaders, in particular government chiefs, not take individual, or unilateral decisions. I ask political leaders to show responsibility, to show caution

Jean-Claude – into the valley of death rode the 600 – Juncker, Luxembourg’s prime minister and holder of the rotating EU presidency, continued to insist ratification should go forward as planned. Since Luxembourg is to have the next scheduled referendum, it will be interesting to see whether he in fact leads the troops more than the statutory ‘half a league’.

Europolitix has it that behind the scenes (and this is really the problem about how we do politics in Europe) a revolt is brewing amongst those who would be asked to follow Junker’s noble sacrifice: Poland, Denmark, Ireland, the Czech Republic, and, of course, the UK.

This entry was posted in A Fistful Of Euros, Economics: Currencies and tagged , by Edward Hugh. Bookmark the permalink.

About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

7 thoughts on “ECB Holds Rates at 2%

  1. quote from Jean Claude Trichet today at the ECB news conference when asked about the demise of the euro:
    “absurd”, ” i dont comment on absurd questions, if your question is wheher or not there is a likeihood for california or alaska or florida to have its own currency. i would reply in exactly the same fashion. “,”absurd”

    problem is, that calif or alaska or florida are states bound by a constitution, but france and benelux are countries who voted not to be bound by a constitition.
    oops. jean claude, this is not so absurd

  2. “wheher or not there is a likeihood for california or alaska or florida to have its own currency.”

    Nice one Fred. My feeling is that if he is usinmg this kind of argument he is either a nave, or he doesn’t really understand the issues. I prefer to believe the latter. I missed the webcast, and when I played it back later, I found they hadn’t included the question and answer session.

    This problem is now going to come back and haunt them I’m afraid. It is no answer to peoples legitimate concerns to say the ‘euro is a unique success story’ or to start talking about Florida and Alaska: what about the UK and Sweden? This is the way ‘not to handle issues’ which has produced the recent referendum results.

    From what I could see he didn’t look well. In that sense he had my sympathy, this is now one collosal headache. As I said yesterday, whatever he actually did today he was bound to be criticised.

  3. My feeling is that if he is usinmg this kind of argument he is either a nave, or he doesn’t really understand the issues.

    Neither. He’s doing his duty. His office requires that.

  4. “He’s doing his duty. His office requires that”

    Oliver, I understand this, my point is you don’t need to use silly arguments to do your duty. Just defend the euro, and say the question of re-introducing currencies doesn’t arise. The problem is, and this has been a problem at the ECB since the time of Duisenberg, they don’t seem able to field even basic questions.

  5. The problem is, and this has been a problem at the ECB since the time of Duisenberg, they don’t seem able to field even basic questions.

    It seems to me that he must avoid rational discussion at all. Rational discussion if it is to be sensible must allow both outcomes. His duty is to pretend not only that the Euro is a good thing, but that any doubt is ridiculous.

    That he was asked at all is a sign of serious weakness and that he responded at all even more so, but the day the boss of a central bank in an official press conference must seriously discuss the existence of the currrency he administers that currency is already dead.

  6. Or, if I may put it another way, you don’t get a theological discussion if you doubt the resurrection in a public audience with the pope.

Comments are closed.