Saturday, May 06, 2006

Rates will rise in euro zone

Nasdaq: ECB Issing - Historically Low Rates Unlikely To Continue

It is widely predicted that the ECB will raise the base rate by 25 basis points to 2.75% in June.

Posted by Webmaster @ 02:45 PM (622 views)
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9 Comments

1. Uncle Tom said...

You heard it here first!

Saturday, May 6, 2006 05:09PM Report Comment
 

2. Not So Fast Sherlock said...

They are such at low levels because they NEED to be. High unemployment is still a problem in Germany and France and Italy too is having problems. If they hike rates too much they might only succeed in stifling whatever tentative signs there are of recovery in Germany. So they need to talk tough to try to frighten the Spanish and Irish but actually take very gentle steps for the major european economies. A balancing act for divergent regional needs.

It's not a question of another rate hike so much as if this is only one hike in a long line of hikes to come.

Saturday, May 6, 2006 05:45PM Report Comment
 

3. Harold said...

...and the UK will have to follow suit. We could be looking at 6% here by the end of the year quite easily.

Saturday, May 6, 2006 06:58PM Report Comment
 

4. Bidin'matime said...

Yep - competitive rate rises on the way (I can't wait to be earning even more profit on my equity over the rent I'm paying!)...

Saturday, May 6, 2006 07:02PM Report Comment
 

5. Talking_rot said...

I can't buy into the idea that Europe will raise interest rates very much. Germany and France remain key players who are shouting for lower rates. Who holds the sway in Europe - not Italy, Ireland, or the other countries with higher inflation. Yes - I believe different countries in Europe have prices rising a different levels. This is exactly what happens in America where different States have different levels of inflation and the Fed Bank has a very difficult balancing job as a result.

I wonder what the effect of a marginal increase in Euro interest rates will have on the strength of Sterling?

Saturday, May 6, 2006 09:40PM Report Comment
 

6. Uncle Tom said...

Trying to work out what the eurozone will do is as much a game of politics as it is economics.

The euro is the product of a shotgun marriage - ill thought through, and introduced without any of the electorates being asked for their view on the matter.

There is not the slightest evidence that it has brought the participating countries closer together, and plenty of evidence that it is causing real damage to several of them, possibly most.

While some of the smallest ex soviet bloc countries can see an advantage from joining, the big question is which country will be the first to leave, - when, - and how?

All eyes are on Italy at the moment, but the natural volatility of the French could give us a surprise, as could Greece. If the Germans are the first to lose patience, the whole project might be unwound in a single exercise.

All good fun (for us, at least!)

Sunday, May 7, 2006 12:09AM Report Comment
 

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8. Not So Fast Sherlock said...

But wasn't it the French who insisted on the creation of the euro as a pre-condition of German re-unification (and as a barrier to the re-emergence of previous phenomena) Perhaps short term convergence problems are worth it for long term peace in Europe?

And nobody is sorry to see the back of currency change transactions. The overheating of the peripheral economies isn't as central a concern as what happens in the trillion dollar economies of Germany, France and Italy. That's my point by throwing shapes the ECB can possibly dampen overheating in the smaller economies while maintaining an 'accomodative' rate policy for the dominant territories.

Don't underestimate the strenght of the Franco-German axis and their mutual long-term disdain for Anglo-American models.

Friday, May 12, 2006 10:57PM Report Comment
 

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