ECB hold off on September rate increase

September 07, 2007

The ECB (European Central Bank) yesterday held off on the much expected interest rate increase leaving their base rate at 4 percent. For the past few months it was expected that they would increase rates further this month but the growing crisis in the financial markets over the past weeks led many to believe that they would hold off on this months increase.

This announcement is welcomed by many homeowners who have already seen two increases this year and a total of eight over the past two years. While it is expected that the ECB may hold off increasing interest rates again next month they made clear that this is not necessarily the end of this. "Delayed doesn't mean abandoned" said council member Axel Weber at a conference in Frankfurt today and President Jean-Claude Trichet said that the ECB has a "determination to act in the future whenever it is necessary".

Some more optimistic economists believe we have seen the end of this series of rate increases. "There is some possibility of a rate rise in December, but the prospect of a substantial reduction in US interest rates and a likely easing of growth in the euro area suggest borrowing costs may have peaked," said Austin Hughes, economist at IIB Bank. "Rates are on hold, albeit with an ECB bias towards tightening further. However, it is my view that the ECB is now at the end of the rate hike cycle," said David Tilson, who is head of trading at Bank of Ireland Global Markets.