The central bank of Slovakia maintained its benchmark rates for the tenth consecutive month so that inflation can be kept to its minimum which in turn will let Slovakia embrace the euro in the next year. The Vice Governor of the central bank Viliam Ostrozlik after a meeting in Bratislava, Slovakia, told reporters that the policy makers will be maintaining the two week repurchase rate at 4.25%. The bank’s decision to maintain the rates was expected by the thirteen economists whom Bloomberg had surveyed. The pressure on Slovakia to control its inflation is great because it is going to adopt the euro currency in 2009 after Slovenia, which was the first communist nation to take to the euro.

Economists are of the opinion that even price growth has increased its speed and has been tamed by the improving currency and the growth is also not that fast so that increase in rates can be justified. The central bank also has to manage borrowing overheads to the euro zone. The economist with Slovenska Sporitelna AS in Bratislava, Maria Valachyova says that monetary conditions are being made restrictive by the strengthening of Koruna and the restrictive monetary conditions will assist in fighting the risks of inflation. The economists further held that the Slovak central bank will be maintaining the rates unless the EU decides about the euro-adoption bid.

The Koruna traded against the euro at 32.765. Koruna’s gain this year is about 2.5% based on the expectations that Slovakia will appreciate the central rate by which Koruna is attached to the euro. Peter Sevcovic, the board member said that the Koruna’s latest temporary volatility will have little effect on the inflation. The credentials needed for countries to switch to the euro state that nations must maintain their 12-month standard yearly inflation rates within 1.5% points of the standard of the three European Union nations with the most sluggish growth of price.

Although growing prices of food and energy pressed the rate of inflation to 3.8% in January which was the highest in thirteen months, the standard price growth is going to stay down in the European Union’s standards. The governor also said that the highest economic growth of 14.1% for the fourth quarter does not indicate demand pressures in the economy. The Governor of the central bank of Slovakia Viliam Ostrozlik further added that that development of the economy is in accordance with the expectations of the bank and there is no need to make any changes in the monetary policy. If the EU accepts Slovakia’s currency switchover bid in the current year the central bank will have to meet its interest rates with that of the euro regions zones. As per the average estimate of twenty four economists, Bloomberg surveyed the European Central Bank which is likely to bring down its standard two-week rate by half-a-point for the current year from its 4%. The improving prospect earlier this year made the National Bank of Slovakia to cut its standard rate by half a point.

Tags: Interest Rates News by Michael Greene
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According to a survey of economists the central bank of Hungary is quite likely to continue with its standard interest rates and this is because the Hungarian economy is the slowest moving economy of the European Union and another reason why the central bank will not change its interest rates is that it wants to reduce the pressure caused by rising inflation. There are 12 policy makers of the central bank and President Andras Simor leads this group of policy makers in Hungary. Sixteen out of the 27 surveyed economists are of the opinion that the policy makers will continue with the two-week deposit rate at 7.5%. Seven of the surveyed economists anticipated that the interest rates will increase to 7.75% as well as 4% to 8%.

The decision of the policy makers will be declared in Budapest. The economic growth of Hungary is the slowest in over eleven years following the steps taken to rein in the highest deficit in budget which resulted in preventing consumer spending and also hampered investment. These things analysts say may overshadow the dangers of speeding inflation which is caused by costly oil and a sluggish currency. An economist with Danske Bank A/S in Copenhagen Lars Christensen opined that the decline in the economy is the most important reason why the central bank will not increase the rates. He also said that macro data was not expected to be weak and the central bank has experienced a steady hand and it is very likely that it will maintain it that way. The forward rate agreements indicate that investors are all set for higher rates in the coming six months. The increase between the six-month forward rate and the base rate increased to 72 basis points and this gain is highest since October 2006. A basis point is equal to 0.01 percentage point.

The money market rate for three months is 7.92% which is almost 42 basis points greater than the rate of the central bank of Hungary. The forint of Hungary has also registered a weakness by as much as 2% as against the Euro since the last rate judgment which was on January 21.On February 11th the forint dropped to its fifteen month low. The weakness of forint is attributed largely to investors who are wary of potentially high risk assets due to fears that the US economy would slip into recession. This opinion was shared by economist Illes Toth at DZ Bank AG in Budapest among others. The economist also said that the weakness in forint and high costs of oil following crude oil is reaching its record price of $100 on the 20th of February and this will force the central bank of Hungary to increase its inflation estimate for the year 2009 to greater than its 3% target. Toth further added that this recession is not the only reason for the bank to raise the rates but there is the danger of downward inflation by way of demand and the retail and wage data indicate this fact.

Tags: Interest Rates News by Vanessa Clark
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Jean-Claude Trichet, the ECB President overturned the route and indicated that he is ready to cut down interest rates. As economic developments were faltering, it was for the first time in over five years that the interest rates would be reduced. However, in the previous week, Trichet had threatened to raise the interest rates as the economic reports suggested Europe was been infected by the US economies slower pace. As the executive and consumer assurance dropped down the countries service trading developed to a slower rate in the month of January. After the ECB did hold its interest rates at 4%, Trichet said that the hesitation about the outlooks for the economic development is strangely elevated.

Trichet even said that the 21 members of the bank did not consider the increase rates like it had been in the previous month. Moreover, the amount of rising businesses can counteract the economy of the United States. The Euro had dropped while the bonds climbed remarkably. In order to control inflation, ECB has been borrowing finance since June at the six year high. In the comparison, the Federal Reserve of US lowered its interest rates at a faster pace from 1.25 % to 3% in the last month since 1990.

Investors Expect Further Cuts

If incase the economic circumstances continue to worsen, then it is possible for further interest rate cuts exclaimed the economist in London, Sandra Petcov. Royal Bank of Scotland and BNP Paribus SA expressed their predictions for a further cut in interest rate as well as Rabobank Group NV predicts that the bank will reduce lending rates instead of keeping it stable. According to further dealings, investors raise expectations that ECB may cut its level for at least twice in the present year. The interest rate deals which mature in the month of December dropped to 18 points up to 3.34 %; it was 66 points lower compared to the rates of ECB. On 27th December it was up to 4.36 % and averaged 31 points extra compared to the rates of ECB fro the previous five years. On 6th February, the Euro declined from 1.4632 dollars to 1.4496 dollars and the earnings on the German bunds dropped to 5 points which is 3.85 %.

Slower Development

On 29 January, the IMF (International Monetary Fund) reduced its present year euro regions increasing estimation by half point up to 1.6 %. The IMF even cut its increasing estimates for Japan and US, the two largest economies of the world. On 6th of December, ECB estimated their economic increase of up to 2 % in the present year which was 2.7 % in the year 2007. ECB President Trichet exclaimed that the new information has established the ECB’s appraisal which risks the surroundings. As the subprime mortgages collapsed making the US economy to slip down, this related to the drop in the stock market. This drop increased the credit costs all over the world as most of the banks became hesitant to lend funds to each other. DAX index of Germany’s benchmark lost 16 % where as 12 % was the estimated loss occurred to Dow Jones Stoxx 600.

Tags: Interest Rates News, ECB: European Central Bank News, European Economy News by Michael Greene
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Inflation across the Eurozone has been recorded as falling over the month of July, according to official regional figures released today.

Price rises across the 13-strong Eurozone region were down on last month’s figures, according to the Eurostat report released early this morning.

From 1.9% in June, inflation fell to 1.8% through July, remaining within the European Central Bank’s guideline rate of 2%.

Amongst some of the most significant contributors to inflation were tobacco and alcohol and leisure sectors, which continue to support much of the price rises across the Eurozone month on month.

Despite today’s news, analysts have still widely predicted the European Central Bank will raise interest rates by a quarter of a percent when they next meet in early September.

However, with poor growth figures released from three of the major economies in the region over the last week, a further interest rate rise may even further suppress the regeneration effort.

With ongoing fears of a lack of credit availability on a global level, spawned largely from the US sub-prime lending sector, the European Central Bank last week joined the Federal Reserve and the Bank of Japan in offering cash aid to rescue their respective finance and lending industries.

However, many analysts have claimed the move of the European Central Bank in injecting liquidity into finance and considering raising interest rates simultaneously is contradictory, calling for flexibility and sensibility to prevail when the bank meets to decide its interest rate policy next month.

“It’s a crazy situation of a central bank raising rates and at the same time adding liquidity into the system. What is the message the central bank is putting across by doing that?”

The news is expected to have some impact on trading across European markets over the course of the morning.

Tags: Interest Rates News, ECB: European Central Bank News by stewart
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The European Central Bank lived up to expectations on Thursday when it lifted Eurozone interest rates by 25 basis points to 3.75 percent. Most analysts were sure that the rate would go up after the ECB’s president, Jean-Claude Trichet, said after last month’s meeting that the Bank would exercise “strong vigilance” in fighting inflation. Those words have come to be seen as Mr. Trichet’s code for “expect a rate hike next month” among analysts.

More rate increases are expected in the future as core inflation is likely to rise and wages go up. One German union is currently demanding wage hikes of 6.5 percent at the least. In addition, the money supply has continued to rise in the Eurozone. It was up by 9.8 percent in January over the same period last year and its growth increased faster in December and January than it has since early in 1990.

Probably playing into the decision from the ECB to raise rates was new data showing that the Eurozone economy grew by 0.9 percent in the last quarter of 2006 for full-year gross domestic product growth of 2.7 percent.

Tags: Interest Rates News, ECB: European Central Bank News by Brian Turner
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New data shows that inflation grew by 1.8 percent in February over the same period last year. The growth was slightly less than the 1.9 percent that had been expected and remained below the 2 percent inflation ceiling set by the European Central Bank. Even though the inflation rate remains below where the ECB wants it to be, most analysts remain convinced that the Bank will issue another interest rate hike when it meets in March. A few analysts, on the other hand, believe that the Bank will wait until summer to raise rates again.

In a separate report, the purchasing managers’ index supported the inflation report, by showing that the Eurozone manufacturing sector is still growing. The index rose to 55.6 in February, up slightly from its January level of 55.5, but a bit lower than the 55.8 reading that had been expected. Any reading above 50 shows expansion in the sector. Growth in the index was helped by gains in France and Italy that more than compensated for a decline in Germany that was likely due to a hike in the value added tax there from January 1.

Tags: Interest Rates News, ECB: European Central Bank News, European Economy News by Brian Turner
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Interest rates in the Eurozone were kept on hold at 3.5 percent on Thursday, but many analysts look for another rate increase at the European Central Bank’s next meeting, scheduled for March. In comments after the meeting of the ECB, the Bank’s president said that “vigilance” must be used in monitoring the economy, a word he often uses in statements a month ahead of rate increases. Last month, he used instead the phrase “close monitoring”. This use of language by the ECB president is closely watched by analysts looking for clues about where the interest rate is likely to go next.

With unemployment down in Germany and France and with consumer confidence still robust after an increase in the value added tax in Germany, from 16 percent to 19 percent, many analysts predict strong growth in the economy during the first half of 2007. Along with that growth comes the possibility that inflation will also grow.

The decision by the ECB came after the Bank of England also voted to keep the UK interest rate steady at 5.25 percent after it had raised it last month. Many analysts look for another near-term rate hike there, as well.

Tags: Interest Rates News by Brian Turner
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As expected, the European Central Bank raised interest rates in the Eurozone on Thursday. The rate rise was by 25 basis points ti 2.75 percent. Some analysts had speculated earlier in the week that it would hike rates by 50 basis points, but sentiment had turned to an expectation of the smaller rise in rates as the Bank’s meeting drew nearer.

Data contributing to the decision to raise rates included consumer price inflation that was up 2.5 percent in May, above the ECB’s target of below 2 percent. Consumer price inflation had been up by 2.4 percent in May and by 2.2 percent in March. In addition, producer price inflation was up to 5.4 percent in April, with core inflation up by 2.2 percent.

The circumstances that kept the Bank from issuing a 50 bp increase included fears that the recovery in the Eurozone’s economy could be too dependent on growth in export-focused sectors and that domestic growth could stall if money is tightened too much or too quickly. In addition, a 50 bp hike could have strengthened the euro, which would have sent the dollar-cost of exports up. Also, the International Monetary Fund said that the region’s economy could not support too high a rate hike.

Tags: Interest Rates News, ECB: European Central Bank News by Brian Turner
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New economic data from the Eurozone has made it more likely than ever that the European Central Bank will raise interest rates when it meets June 8. The new data comes from several sources and shows that inflation is up, unemployment is down, and retail sales are up. The only real negative data is that consumer spending in Germany is still held back by real wages that are not growing or are actually down.

Inflation in the Eurozone was up to 2.5 percent in the most recent figures available after being at 2.4 percent in the previous reading. This figure, taking in the entire region, was released by Eurostat, the EU’s statistical office, and is at its highest since October 2005. Core inflation, excluding the prices for food and oil, also shows signs of rising. The 1.6 percent rate in April is, however, still considered within reasonable limits and some economists have put indications that it is on the rise to one-time factors.

Elsewhere, both Germany and France have said that unemployment in their nations is down. In France, the unemployment rate is reported to be 9.0 percent, its lowest level in three and a half years. In Germany, unemployment was down to 11 percent in May. That left 4.596 million people out of work in German, but was the smallest percentage of the working population out of a job since December 2004.

In Germany, retail sales were up by 2.8 percent in April after having dropped by 1.7 percent in March, according to that nation’s federal statistics office. Even so, the combined figures for both months show sales still down by 0.8 percent as spending by consumers is limited by a lack of growth in real wages.

Still, the total economic picture in the Eurozone has most analysts expecting that the ECB will raise interest rates by at least a quarter of a percentage point when it meets next.

Tags: Interest Rates News, ECB: European Central Bank News, European Economy News by Brian Turner
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New economic data from the Eurozone has made it more likely than ever that the European Central Bank will raise interest rates when it meets June 8. The new data comes from several sources and shows that inflation is up, unemployment is down, and retail sales are up. The only real negative data is that consumer spending in Germany is still held back by real wages that are not growing or are actually down.

Inflation in the Eurozone was up to 2.5 percent in the most recent figures available after being at 2.4 percent in the previous reading. This figure, taking in the entire region, was released by Eurostat, the EU’s statistical office, and is at its highest since October 2005. Core inflation, excluding the prices for food and oil, also shows signs of rising. The 1.6 percent rate in April is, however, still considered within reasonable limits and some economists have put indications that it is on the rise to one-time factors.

Elsewhere, both Germany and France have said that unemployment in their nations is down. In France, the unemployment rate is reported to be 9.0 percent, its lowest level in three and a half years. In Germany, unemployment was down to 11 percent in May. That left 4.596 million people out of work in German, but was the smallest percentage of the working population out of a job since December 2004.

In Germany, retail sales were up by 2.8 percent in April after having dropped by 1.7 percent in March, according to that nation’s federal statistics office. Even so, the combined figures for both months show sales still down by 0.8 percent as spending by consumers is limited by a lack of growth in real wages.

Still, the total economic picture in the Eurozone has most analysts expecting that the ECB will raise interest rates by at least a quarter of a percentage point when it meets next.

Tags: Interest Rates News, ECB: European Central Bank News, European Economy News by Brian Turner
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Government bonds in the Eurozone saw yields fall as investors worried that an increase in the money supply would push the European Central Bank to raise interest rates when they meet next week. The money supply grew at a rate of 8.8 percent in April, up from 8.5 percent in March. Also adding to forces holding bond prices down in the region was a comment from an ECB official that rising energy costs are sending core inflation up. Late in the day, yields on the two-year Schatz were at 3.313 percent, a rise of 4.3 basis points, while the ten-year Bund had added 4.7 basis points to a yield of 3.935 percent.

Tags: Interest Rates News, European Economy News by Brian Turner
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Government bonds in the Eurozone saw yields fall as investors worried that an increase in the money supply would push the European Central Bank to raise interest rates when they meet next week. The money supply grew at a rate of 8.8 percent in April, up from 8.5 percent in March. Also adding to forces holding bond prices down in the region was a comment from an ECB official that rising energy costs are sending core inflation up. Late in the day, yields on the two-year Schatz were at 3.313 percent, a rise of 4.3 basis points, while the ten-year Bund had added 4.7 basis points to a yield of 3.935 percent.

Tags: Interest Rates News, European Economy News by Brian Turner
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The European Central Bank chose to keep interest rates at their current levels in a meeting on Thursday. The decision was expected, but many analysts believe that the ECB will raise rates next month, despite comments to the contrary from the president of the ECB.

In the Eurozone, interest rates remained at 2.5 percent, but some analysts expect that by the end of the year it will have risen to 3.5 percent. This expectation is based on data showing that the region’s economy is recovering and business confidence is growing. The Purchasing Managers Index was at 58.2 in March, the highest it has been since September 2000, companies have increased capital spending, and various measures indicate that economic growth in the first three months of this year is at 0.7 percent. Less optimistic data includes the fact that unemployment remains high - 9.1 percent in Germany and 8.9 percent in France - and the decline of retail sales by 0.2 percent in February.

Tags: Interest Rates News, ECB: European Central Bank News by Brian Turner
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The euro was stronger on Tuesday on new data that tended to reinforce the expectation that eurozone interest rates will be raised again. The probability that the European Central Bank will send rates higher in May has been estimated at anywhere from 50 percent to 90 percent, and some analysts even suspect that a hike might come in April. Among the data adding credence to these predictions are a higher Ifo business sentiment index out of Germany that put sentiment at a 15-year high in March. Additionally, the eurozone’s M3 broad money supply was up to 8 percent in February, from 7.6 in January.

At mid-day in New York, the euro had gained 0.5 percent to $1.2070 versus the US dollar. The shared currency was up by 0.9 percent to ¥141.50 in relation to the Japanese yen, and it rose 0.4 percent to £0.6902 against sterling.

Tags: Exchange Rates News, Interest Rates News by Brian Turner
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The euro was stronger on Tuesday on new data that tended to reinforce the expectation that eurozone interest rates will be raised again. The probability that the European Central Bank will send rates higher in May has been estimated at anywhere from 50 percent to 90 percent, and some analysts even suspect that a hike might come in April. Among the data adding credence to these predictions are a higher Ifo business sentiment index out of Germany that put sentiment at a 15-year high in March. Additionally, the eurozone’s M3 broad money supply was up to 8 percent in February, from 7.6 in January.

At mid-day in New York, the euro had gained 0.5 percent to $1.2070 versus the US dollar. The shared currency was up by 0.9 percent to ¥141.50 in relation to the Japanese yen, and it rose 0.4 percent to £0.6902 against sterling.

Tags: Exchange Rates News, Interest Rates News by Brian Turner
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The euro rose in relation to most major currencies during the week ending March 3. It was up 1.3 percent to $1.2031 versus the US dollar, gained 1 percent to ¥140.12 against the Japanese yen, and rose 0.8 percent in relation to sterling, to £0.6859.

The euro’s success came as the European Central Bank once again raised interest rates by a quarter point, to 2.5 percent, after having hiked rates by the same amount in December. Comments from ECB board members made it clear that interest rates will go up again in the foreseeable future. Besides raising rates, the ECB also revised its forecasts for growth and inflation for the year, predicting that both will be higher than previously expected.

Accordingly, Goldman Sachs raised its forecast for eurozone interest rates at the end of the year from 2.5 percent to 3 percent. Meanwhile, analysts at Citigroup attributed at least part of the euro’s advances to the narrowing yield spread between two-year government bonds in the eurozone and the United States.

Tags: Exchange Rates News, Interest Rates News, ECB: European Central Bank News by Brian Turner
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The euro rose in relation to most major currencies during the week ending March 3. It was up 1.3 percent to $1.2031 versus the US dollar, gained 1 percent to ¥140.12 against the Japanese yen, and rose 0.8 percent in relation to sterling, to £0.6859.

The euro’s success came as the European Central Bank once again raised interest rates by a quarter point, to 2.5 percent, after having hiked rates by the same amount in December. Comments from ECB board members made it clear that interest rates will go up again in the foreseeable future. Besides raising rates, the ECB also revised its forecasts for growth and inflation for the year, predicting that both will be higher than previously expected.

Accordingly, Goldman Sachs raised its forecast for eurozone interest rates at the end of the year from 2.5 percent to 3 percent. Meanwhile, analysts at Citigroup attributed at least part of the euro’s advances to the narrowing yield spread between two-year government bonds in the eurozone and the United States.

Tags: Exchange Rates News, Interest Rates News, ECB: European Central Bank News by Brian Turner
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In the eurozone on Thursday, the euro gained value after the European Central Bank voted to raise its main refinancing rate by a quarter point to 2.5 percent. At the same time, the ECB president made comments that indicated that there will be more rate hikes to come this year. He said that the current rate hike will only “contribute” to keeping inflation in check.

The ECB has predicted that inflation this year will be around 1.9 to 2.5 percent, replacing its December forecast of inflation in the 1.6 to 2.6 percent range. The Bank also predicted that the eurozone economy will grow by 1.7 to 2.5 percent this year, somewhat more than its earlier estimate of 1.4 to 2.4 percent growth for 2006.

The euro gained 0.9 percent on the US dollar to $1.2016, while it added 0.8 percent in relation to sterling, to £0.6862. The shared currency was also up in relation to several Scandinavian and Eastern European currencies, and it gained 1 percent to ¥139.60 versus the Japanese yen.

Tags: Exchange Rates News, Interest Rates News, ECB: European Central Bank News by Brian Turner
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In a move that was expected by most analysts, the European Central Bank raised its main refinancing rate on Thursday by a quarter point, to 2.5 percent. It was only the second time rates have been raised in the eurozone in five years. Interest rates are expected to rise by a further quarter or half point to 2.75 percent or 3 percent by the end of the year.

Today’s hike and those predicted to come are driven by improving economic data from the eurozone and an expected pressure toward inflation. The headline inflation rate was 2.4 percent in the year ending in January, above the ECB’s target of around 2 percent. The core interest rate, which excludes food and energy prices, was at 1.2 percent.

Another pressure to raise interest rates comes from the concern by some members of the ECB’s governing council that if interest rates continue to remain low, borrowing by households and businesses will continue to grow. New data shows that lending to individuals was up at an annual rate of 9.4 percent in the eurozone in January, the fastest growth since 2000. Business lending was also up. Property prices are also up, by 7.7 in the first half of last year, leading the ECB’s president to argue that a tight monetary policy might be necessary to control eurozone property prices.

Tags: Interest Rates News, ECB: European Central Bank News, European Economy News by Brian Turner
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In a move that was expected by most analysts, the European Central Bank raised its main refinancing rate on Thursday by a quarter point, to 2.5 percent. It was only the second time rates have been raised in the eurozone in five years. Interest rates are expected to rise by a further quarter or half point to 2.75 percent or 3 percent by the end of the year.

Today’s hike and those predicted to come are driven by improving economic data from the eurozone and an expected pressure toward inflation. The headline inflation rate was 2.4 percent in the year ending in January, above the ECB’s target of around 2 percent. The core interest rate, which excludes food and energy prices, was at 1.2 percent.

Another pressure to raise interest rates comes from the concern by some members of the ECB’s governing council that if interest rates continue to remain low, borrowing by households and businesses will continue to grow. New data shows that lending to individuals was up at an annual rate of 9.4 percent in the eurozone in January, the fastest growth since 2000. Business lending was also up. Property prices are also up, by 7.7 in the first half of last year, leading the ECB’s president to argue that a tight monetary policy might be necessary to control eurozone property prices.

Tags: Interest Rates News, ECB: European Central Bank News, European Economy News by Brian Turner
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