Thursday, December 07, 2006

Forex News: ECB lifts key rate to 3,5%

Forex News

The European Central Bank on Thursday lifted its base rate by a quarter point as the European economy continues to accelerate. The bank's concerned there's too much money around for companies and consumers to spend.

The european central bankers, who unlike their Federal Reserve counterparts are keen watchers of money supply, are acting as the money supply is rising at an 8.5% rate.

The ECB, which sets rates for countries that use the euro as their currency, favors growth closer to 4.5%. With money supply on the rise, the ECB is acting even as annualized inflation at 1.8% is below its target of near 2%.

The move was widely anticipated and represents the sixth interest-rate hike in a year. ECB President Jean-Claude Trichet said rates remain accommodative and the central bank will monitor risk very closely. Trichet has not given any concrete signals for the timing of the next rate hike, speaking in the overall framework of a cycle of monetary-policy tightening.


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