ECB Leaves Rates Unchanged Despite Inflation Concerns

The European Central Bank has voted to leave monetary policy unchanged even in the face of rising inflationary pressure that has pushed price growth above the target rate, according to Financial Times.

The European Central Bank has voted to leave monetary policy unchanged even in the face of rising inflationary pressure that has pushed price growth above the target rate, according to Financial Times. On Thursday, the ECB announced that it would leave its primary interest rate unchanged at 1% for the 21st month in a row, and the decision was widely expected even though inflation reached 2.4% in January to exceed the central bank’s target of “below but close to” 2%. The current level of price growth is the highest in over two years.

The ECB raised concerns over “second round effects” of the current inflationary pressure, such as increased wages, even though inflation is expected to ease later the in the year. According to Bloomberg, the central bank’s president, Jean-Claude Trichet, said, “Very close monitoring is warranted,” adding that policymakers expect “that price developments will remain in line with price stability over the policy-relevant horizon.” However, the tougher tone adopted by the ECB in recent weeks has increased speculation that an interest rate rise could be in the works later this year.

Click here to read the story on the ECB from Financial Times.

Click here for coverage of Trichet’s comments from Bloomberg News.