Forex Blog: Currency Trading News & Analysis.

June 7th 2007

ECB Defies Opposition and Hikes Rates

The European Central Bank (ECB) today raised the benchmark European lending rate to 4%, its highest level in six years.  The move came amid fierce opposition by European politicians who rightfully fear that higher interest rates will only send the Euro higher against other industrialized currencies and crimp the European economy.  The Euro is hovering around record levels against the USD, Japanese Yen, and Chinese Yuan, even though its economy is probably the weakest of the bunch.  However, the nature of the European Union means the interests of all member countries need to be looked after; while many of the traditional European powerhouse economies are struggling, Eastern Europe, for example, is thriving.  Taking matters into his own hand, France’s new president, Nicolas Sarkozy, is threatening to legislate a forced decline in the Euro, and many analysts think he may succeed.  The Telegraph reports:

“Sarkozy and Prodi are not going to let go of this. There’s a groundswell of feeling that Europe is being taken for a ride by the rest of the world, and they’re not going to put up with it any more.”

Read More: ECB rates rise as gloves come off

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Posted by Adam Kritzer | in Central Banks, Euro | No Comments »

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