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December 11th 2007

ECB Mulls Rate Hike

While holding rates steady at its meeting last week, the European Central Bank (ECB) raised the possibility of a rate hike at its next meeting, which is to be held on January 10.  Jean-Claude Trichet, President of the ECB, was especially forthright: "we will not hesitate to hike rates."  The Bank’s hawkish comments owe to a spate of recent economic data, which point to a strengthening Euro-zone economy.  At the same time, however, political pressure from certain EU member states is mounting for the ECB to rein in the Euro.  This notion is directly at odds with a rate hike, which would narrow the differential between EU and US interest rates, and provide further upward impetus for the Euro. Though, the pressure could subside since the EU economy is performing well, despite the strong Euro. DailyFX reports:

For those people who have been criticizing the Euro for hurting the Eurozone economy, their complaints continue to be refuted by economic evidence.

Read More: Euro Rallies on Strong Data and Hawkish Comments

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Posted by Adam Kritzer | in Euro | No Comments »

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