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Rate rise cycle halted

Thursday, September 08, 2011 - 01:42

Sept. 8 - Jean-Claude Trichet has signalled an end to the cycle of rate hikes, announcing the euro zone inflation risks were no longer skewed to the upside and economic growth would be slow at best. Ciara Sutton reports.

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There's again been no change to interest rates in Europe or Britain. The European Central Bank signalled its cycle of rate hikes is at an end, holding at 1.5 percent. President Jean-Claude Trichet changed his tone talking of inflation risks being broadly balanced, instead saying economic growth would now be slow at best. SOUNDBITE (IN ENGLISH) ECB PRESIDENT JEAN-CLAUDE TRICHETSAYING: "Inflation has remained elevated and is likely to stay above two percent in the months ahead before declining next year." Trichet also said he was nervous about the euro zone economy but stressed the Bank was committed to helping struggling countries. SOUNDBITE (IN ENGLISH) ECB PRESIDENT, JEAN-CLAUDE TRICHET SAYING: "The Greek government, receiving a very strong message from the IMF, from the Commission in liaison with us, from all governments of Europe, without any exception, will do what is necessary, namely to fully respect the commitments that have been taken." The new attitude towards inflation is a change of tact for the ECB. A month ago Trichet said risks to the growth outlook were balanced. There were two rate rises earlier in the year and more were expected. But a deterioration in the economy and an escalating debt crisis has altered the outlook dramatically. And policymakers' failure to deal with the problems has eroded confidence in the 17-country euro zone. Some private sector economists now put the chance of a return to recession at at least 50 percent. The euro took a tumble on the bleak forecast, hitting a 2 month low against the dollar. Ciara Sutton, Reuters

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Rate rise cycle halted

Thursday, September 08, 2011 - 01:42