ECB Bucks Trend, Leaves Rates Alone --- Despite Hopes of a Cut, Central Bank Sees Risk Of Inflation in Europe
Persistent inflation risks kept the European Central Bank from trimming interest rates -- despite a slowing economy, intense political pressure and market expectations of a cut -- and the bank signaled that any reduction wouldn't necessarily come soon.</br></br>"I specifically don't want to introduce a bias in our public utterances or statements," ECB President Wim Duisenberg said at a news conference. "So you keep on waiting and we keep on seeing."</br></br>Mr. Duisenberg further brushed off pressure to cut by saying a series of seven rate increases up until last October resulted in "the disappearance of inflationary risks over the medium term. But having achieved that does not mean that we have to also reverse the course."</br></br>Rate cuts in the U.S. and Japan three weeks ago, coupled with a softer tone on inflation from some of the ECB's most influential officials, sparked speculation the ECB would trim at least a quarter point from its key rate of 4.75% at yesterday's meeting. Now economists believe the ECB will keep rates steady until May or even June, remaining the only major central bank to stand still in the face of the global slowdown. The ECB sets interest rates for the 12 nations using the euro -- the world's second-largest economy.</br></br>The decision disappointed those investors who believe the ECB is sacrificing too much growth for low inflation. Within minutes of the ECB announcement, the euro fell a half cent to 88.4 U.S. cents. Two hours later, the common currency hit a low for the day of 88.1 cents. Late in New York trading, it was quoted at 88.75 cents, down from 88.81 cents late Tuesday.