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London (pte035/04.07.2005/13:43) - According to a recent survey done by Bloomberg http://www.bloomberg.com , a leading global provider of data, news and analytics based in the US, the Frankfurt-based European Central Bank - ECB http://www.ecb.int and the Bank of England http://www.bankofengland.co.uk will most likely leave their benchmark interest rates unchanged. The two banks are probably waiting to see whether economic growth is still slowing across Europe.
The ECB's refinancing rate has been kept at 2 per cent for the last two years, and, in lieu of the announcement on 7th July, it is not expected to change. Thirty-nine of 42 economists who participated in Bloomberg's survey say that the Bank of England will also leave their rates unchanged, despite talk of lowering the repurchasing rate from 4.75 per cent last month.
German Economy and Labor Minister Wolfgang Clement, economists at Standard & Poor's and other politicians have urged the ECB to lower the rates as governments are forced to pare economic growth forecasts due to almost $60-per-barrel oil prices. Consumer spending slowed in the U.K. in the first-quarter and economic growth was revised down to 0.4 percent.
"In the short term it's wait and see and do nothing,'' said Eric Chaney, chief European economist at Morgan Stanley in Paris. "The biggest difference is that for the Bank of England the next move is more likely to be a cut than a hike, whereas for the ECB the options are more evenly balanced.''
Business confidence in Europe rose this month, the first time in three-quarters of a year. Comparatively, UK growth has slowed.
Ian Stewart, chief European economist at Merrill Lynch in London, commented: "The U.K. data have been quite weak across the board." Stewart expects the Bank of England to lower rates in September. "The data in the euro zone have been disappointing, but not uniformly weak. We're going to see rates staying on hold for a long time," he added.
Germany's Clement said at a meeting in Berlin on 29 June that the central bank's monetary policy "isn't necessarily in our interest'". S&P's chief European economist, Jean-Michel Six, believes the ECB should cut rates to help German growth.
Steven Andrew, an economist at fund managers F&C Asset Management in London, says that it the ECB were going to cut rates it would have done it by now. "The bank will take a long, hard look at the consumption data. The trend is still one of deceleration," Andrew added.
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