ECB President offers little hope on interest rates

by Gill Montia

Story link: ECB President offers little hope on interest rates

Hopes for a cut in the base rate later this year look to be fading as the president of the European Central Bank (ECB), Jean Claude Trichet, issues a warning that the European economies have yet to face the worst consequences of the credit crisis.

Speaking last week at the annual conference of the International Capital Market Association, Mr Trichet said we are still some way away from having the full benefit of hindsight on the ongoing turmoil in global financial markets.

Both private and public institutions across the globe are still deeply immersed in tackling all the consequences on the financial system of the continuing process of financial deleveraging, added Mr Trichet.

Mr Trichet is known to be opposed to drastic interest rate cuts, which can lead to higher inflation.

The ECB has continued to hold rates at 4% while the Bank of England has reduced the base rate three times in recent months.

Meanwhile the US the Federal Reserve made a further cut to 2%, in April.

Last week, the Governor of the Bank of England spoke about rising inflation and warned that further cuts in the base rate may be delayed until 2010.