The central bank for Europe has left its benchmark interest rate unchanged at the latest meeting despite mounting inflationary pressure, according to Financial Times. On Thursday, the European Central Bank announced that its main interest rate would remain at 1.25%, which was a decision that was widely expected by economists. The ECB tightened its benchmark interest rate at its previous meeting, and held policy despite inflation surging to 2.8% in April, which is above the “below but close to 2%” target.
The ECB President Jean-Claude Trichet did not say in his statement that the central bank was exercising “strong vigilance” as after previous meetings, delaying expectations for the next interest rate rise. Some members of the ECB’s policy board have pushed for normalizing fiscal policy to pre-recession levels, and to avoid “second round effects” of temporary inflationary pressure from mounting food and energy costs. Some have speculate that the timing of the next move has already been decided.
