ECB holds rates at 4%

11 April 2008

The European Central Bank (ECB) announced yesterday that the base rate of interest in the eurozone would remain at four per cent.

Concerns over inflation led to the decision to hold, the bank's president Jean-Claude Trichet confirmed yesterday.

A rate cut had been predicted, however, by some analysts - due to the continuing strength of the euro and fears that the credit crunch would lead to an economic slowdown.

Speaking to the BBC, analyst at Commerzbank Gavin Friend said that the ECB will "keep the door shut" to future rate cuts.

Currently, inflation in the eurozone is running at around 3.5 per cent - almost double the bank's target - and has been driven by increasing wholesale prices for food and energy.

The Bank of England announced a further 0.25 per cent cut in interest rates yesterday, lowering the base to five per cent.

This is the third such reduction in recent months.

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