Friday, March 7, 2008

European Central Banks Concentrate on Inflation

FRANKFURT -- European central banks left their key interest rates unchanged yesterday as policy makers focused more on the threat of higher prices than on resurgent turmoil in credit markets and a darkening outlook for economic growth.

The European Central Bank kept its policy rate at a more-than-six-year high of 4%, while the Bank of England held its key rate steady at 5.25%.

ECB President Jean-Claude Trichet stressed the euro-zone economy's soundness even as he projected slower investment and consumption growth. And he sought to dispel market expectations of speedy rate cuts by saying that stubbornly high inflation remains the bank's central focus.

At a news conference after the 21-member Governing Council's meeting, Mr. Trichet said the policy makers' decision was unanimous. "We believe that the current monetary-policy stance will contribute" to keeping inflation, and expectations of future inflation, steady, he said. The remarks suggest policy makers are unlikely to consider cutting the key rate soon unless the economy deteriorates rapidly.

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