December 23rd 2005
ECB signals further rate hikes
Yesterday, I reported that Central Banks are becoming more transparent in matters of monetary policy. As if on cue, today the European Central Bank and Bank of England offered separate insight into the directions of their respective interest rates. The ECB hinted that it would likely raise interest rates twice in the next year from the current level of 2.25%, while the Bank of England indicated that a cut in its interest rates would take place in March. The corresponding changes in interest rate differentials should benefit the Euro and hurt the British Pound. Reuters reports:
But some analysts see U.S. rate rises stopping there. The latest report about the ECB is seen as likely to boost the euro. “It’s a reminder that not only the Fed but also the ECB is raising interest rates,” said one currency strategist.