Europe and UK keep interest rates on hold

Both today’s interest rate decisions, in the UK and Eurozone, were ‘no change’ as expected. The Bank of England is widely tipped to keep interest rates on hold until late 2011, while the European Central Bank may raise rates further in the summer.

European Central Bank Trichet, in the accompanying press conference, again states “strong vigilance” was warranted, which is taken to mean that European interest rates could well be increased to stave off inflation over the summer.

Higher interest rates tend to make a currency more expensive, so the cost of exchanging sterling to Euros might be likely to increase if analysts start to ‘price in’ Eurozone interest rate rises before we see any in the UK.

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