Bloomberg News

Euro Stays Lower After ECB Leaves Interest Rates at 1.5 Percent

October 06, 2011

Oct. 6 (Bloomberg) -- The euro stayed lower against the dollar and the yen after the European Central Bank left its benchmark interest rate at 1.5 percent.

The euro weakened against 13 of its 16 major peers tracked by Bloomberg. The central bank’s decision to leave the refinancing rate on hold was in line with the median forecast of 52 economists in a Bloomberg News survey. ECB President Jean- Claude Trichet will hold a press conference at 2.30 p.m. in Berlin. At the central bank’s previous monetary policy meeting on Sept. 8, he said downside risks to the euro area’s economic outlook had intensified.

The euro fell 0.4 percent to $1.3290 at 12:48 p.m. in London. It fell to $1.3146 on Oct. 4, the weakest since Jan. 13. The 17-nation common currency depreciated 0.7 percent to 101.84 yen. It dropped to as low as 100.76 on Oct. 4, the weakest since June 2001.

The euro depreciated 1.5 percent to $1.3882 on Sept. 8 when the ECB kept its main interest rate at 1.5 percent. It fell 1.2 percent to 107.59 yen that day.

The Frankfurt-based central bank raised rates twice this year, by 25 basis points in April and July. It last reduced interest rates in May 2009, when it cut its key rate to a record low 1 percent.

The euro-area inflation rate jumped to 3 percent last month from 2.5 percent in August, the European Union’s statistics office in Luxembourg said on Sept. 30 in an initial estimate. That’s the biggest annual increase in consumer prices since October 2008. Economists had projected inflation to hold at 2.5 percent. The central bank’s inflation ceiling rate is 2 percent.

“The sharp increase in inflation last month underlines the difficulties facing the central bank,” CIBC’s Stretch said.

--Editor: Mark McCord

To contact the reporter on this story: Keith Jenkins in London at Kjenkins3@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net


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