Bank of England cuts rate
The Bank of England lowered its key interest rate by a quarter of a point Thursday while the European Central Bank held steady and signaled no plans to start cutting anytime soon.
Both banks acted, as analysts predicted, in response to their own, somewhat different, challenges: growth worries for the Bank of England and record inflation for the ECB.
Britain’s central bank cut its benchmark rate to 5%, the lowest level in 17 months.
The ECB held its main refinancing rate at 4% after inflation across the 15 countries that use the euro recently rose to 3.5%. That is well above the roughly 2% level the ECB is comfortable with.
ECB President Jean-Claude Trichet appeared to signal that no cuts were likely soon, saying there was “certainly no room for complacency” because of inflation worries. The bloc of 317 million people accounts for about 15% of the world’s global domestic product.
Even amid the global credit crisis that has led the U.S. Federal Reserve to slash rates, Trichet called controlling inflation “the highest priority to the governing council.”
The Bank of England, however, cut rates in the face of pressure from rising inflation and fears about growth, fueled by sagging home prices and falling consumer confidence.
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