MercoPress. South Atlantic News Agency

Euro zone and Bank of England leave rates unchanged

The European Central Bank kept on Thursday interest rates for the 15-nation Euro bloc steady at 4% amid increasing signs that economic growth is winding down. ECB signaled that it was not in a rush to cut rates, as it forecast inflation would stay “high for a protracted period of time”.

Food and fuel prices have pushed inflation up to a record 3.6% in March, though this eased slightly in April. Earlier, the UK's Bank of England left its main interest rate at 5%. Speaking at a press conference in Athens, ECB governor Jean-Claude Trichet said: "Inflation rates have risen significantly since the autumn, owing mainly to increases in energy and food prices." Inflation has remained higher than 3% for the past six months, well above the ECB desired target of 2%. This has made the ECB reluctant to slash rates like its counterparts in the US and the UK, which analysts say have been more severely affected by the global credit problems. The US Federal Reserve has aggressively cut its interest rate from 5.25% to 2% since last September and the Bank of England has also been trimming UK rates, with some predictions that they could end the year at 4.25%. The different approaches have sent the Euro to record highs against the dollar and pound since the beginning of the year. This has made Euro zone exports more expensive and sparked criticism from some leading exporters, including plane maker Airbus. However, once inflation stabilizes, it is thought the ECB will begin to cut interest rates as the region's economy shows signs of cooling. Last month, the European Commission downgraded its forecast for Euro zone growth this year to 1.7%, from its earlier prediction of 1.8%. Meanwhile, analysts have begun to suggest that the US economy may now have turned a corner. The Euro fell to a two-month low against the greenback in early Asian trade on Thursday, as confidence in the US currency returned, but rebounded after Mr Trichet's cautious comments. In Thursday afternoon Europe trade, one Euro was worth 1.5424 after earlier touching 1.5285 US dollar.