Europe Round Up - ECB And BoE Hold Interest Rates

(RTTNews) - Thursday, all eyes were on the European Central Bank and the Bank of England. Both central banks left the interest rates unchanged in expected moves.

Eurozone

Battling high inflation in a sluggish economy, the European Central Bank left its interest rates unchanged at a seven-year high for the second straight month in September. The central bank chief Jean-Claude Trichet said the Eurozone economy is in an episode of weak activity and expects a gradual recovery to follow. At the session held in Frankfurt, the Governing Council maintained the key-lending rate, which is the minimum bid rate on the main refinancing operations, at 4.25% in a widely expected move. The central bank had maintained the rate at a six-year high of 4% since June last year, before hiking it in July 2008. The interest rate on the marginal lending facility was held at 5.25%, while the interest rate on the deposit facility was retained at 3.25%.

The German industrial new orders fell for the eighth consecutive month in July as weakness in domestic demand continued to dog the economy. According to a report from the Federal Ministry of Economics and Technology, industrial new orders declined 1.7% month-on-month in July, slower than June’s revised decrease of 2.6%. The July decline was in contrast to a 0.3% increase predicted by economists. On an annual basis, orders fell 0.7% in July, significantly slower than the revised 6% fall seen in June. Given the decrease in orders, the ministry said the weak phase of industrial production is expected to continue in the coming months, reflecting significantly less optimistic mood in the economy.

The Labor Force Survey results released by the French statistical office INSEE showed that the average ILO jobless rate stood at 7.6% in the second quarter, slightly larger than the anticipated rate of 7.5%. The unemployment rate for the first quarter was revised up to 7.6% from 7.5%. In metropolitan France, the rate stood at 7.2%, unchanged from the first quarter and matched economists’ expectations. But the jobless rate stood below 8% reported in the second quarter of 2007.

The Italian research institute ISAE reported that the confidence indicator for the service sector rose to 7 in August from minus 8 in July. The July reading was the weakest since January 2003. Separately, the ISAE said confidence in the retail trade sector rose to 106.5 from 98.5 in July. According to the ISAE, the July reading was the lowest since May 2005. In the construction sector, the thin-tank said confidence rose to 86 from 83.2.

The Statistical Service of the Republic of Cyprus announced that the Consumer Price Index, or CPI increased 5.4% year-over-year in August, after rising 5.6% in July. Consumer prices had risen 2.5% in August last year.

The Central Bureau of Statistics said the Dutch consumer price annual inflation stood at 3.2% for the second straight month in August. In July, the inflation rate had moved above the 3% mark for the first time since 2002. Economists were looking for an annual increase of 3.1% for August. In June, consumer prices had risen 2.6%.

The Statistics Finland said new motor vehicle registrations decreased 14.5% year-over-year in August, after rising 3.3% in July. The new passenger car registrations declined 14.3% in August compared with a 7.1% increase recorded in July.

The Statistics Austria announced that the country’s trade deficit stood at EUR0.04 billion in June, after a surplus of EUR0.21billion recorded in May.

Rest of Europe

The Bank of England retained its key interest rate as concerns over inflation overshadowed fears of recession in the UK economy. At the end of its two-day meeting, the Monetary Policy Committee of the central bank maintained the official Bank Rate paid on commercial bank reserves at 5% for the fifth straight session. The decision matched economists’ expectations.

In other news, UK house prices dropped 1.8% in August from the prior month, in line with expectations, a report from the mortgage lender Halifax showed. In July, house prices were down 1.7% and declined 1.9% in June. Compared to August 2007, house prices fell 10.9%, slightly faster than a 10.7% decline expected by economists. The average house price has returned to the February 2006 level.

The Executive Board of the Swedish central bank decided to raise its key interest rate as inflation continues to rise and inflation expectations remained at elevated level. The central bank also lowered its growth forecast, while retained inflation estimate for 2008. The Riksbank hiked the repo rate by 0.25 percentage points to 4.75% and expects it to stay at this level for the rest of the year. The Riksbank expects consumer price inflation for 2008 to rise to 3.9%, unchanged from the July forecast. Meanwhile, annual growth forecast was significantly revised down to 1.4% from 2.1%. At the same time, the central bank lowered 2009 inflation forecast to 3.2% from 3.5% and the growth outlook to 0.8% from 1.2%.

Denmark’s industrial production excluding building and repairing of ships and boats increased 1.9% month-on-month in July, the Statistics Denmark said. At the same time, new orders rose 3.8%. Overall production in the Danish industries grew 1.6% over the previous month and orders climbed 3.6%.

The Institute of National Statistics announced that the Romanian retail sales, excluding vehicle trade, increased 22.6% year-over-year in July, after rising 19.3% in June. The statistical agency also said Romania’s nominal net average salary increased 25.8% year-over-year in July. During the period, the real salary rose 15.4%.

Turkey’s statistical office Turkstat announced that the number of building permits issued by municipalities decreased 13.6% year-on-year in the period between January to June. A year ago, the number of building permits had fallen 3.5%.

For comments and feedback: contact editorial@rttnews.com

Posted in Categories: Economy, Eurozone, Forex, Releases, Stocks, UK.