MercoPress. South Atlantic News Agency

Bank of England and ECB leave rates unchanged

The Bank of England resisted calls to cut the cost of borrowing on Thursday and held its main interest rate at 4,75% for the eleventh straight month. Members of the bank's Monetary Policy Committee announced the decision in spite of the four explosions in central London that caused at least 33 deaths and hundreds of injured.

In Frankfurt the European Central Bank, ECB, also decided to leave interest rates in the Eurozone unchanged at 2%, despite growing pressure in some quarters for a cut in rates. Bank of England rates have been frozen since August 2004.

Both in Britain and the Eurozone business groups have complained that rates need to fall so as to boost manufacturing and consumer spending.

ECB president Jean-Claude Trichet revealed that the three banks (Federal Reserve, ECB and Bank of England) have agreed that markets were working and that no emergency injections of liquidity were necessary.

"At this stage we have no particular information that would be calling for action. If it were the case you can be sure we would do that in real time, but again, we are in permanent contact", said Mr. Trichet.

The ECB president added that the central banks did not believe there would be significant economic fall-out from the blasts in London, a similar stance following the March 2004 attacks in Spain.

"We have concluded that the monetary policy stance is appropriate given the outlook for price stability over the medium term", indicated Mr. Trichet.

Since the ECB governing council last meeting a month ago, the Euro has fallen 3% against the US dollar and oil prices have pushed above 60 US dollars per barrel.

In Britain expectations are that the Bank of England will cut rates in its August meeting by a quarter point to 4,5%.

Weak retail sales, a cooling of the housing market and a sluggish manufacturing sector support such a move according to London and New York money analysts.