Brawny euro's interest rate holds steady

The European Central Bank held its key interest rate at 4% while The Bank of England cut interest by a quarter-point to 5.5%. The European Central Bank held its key interest rate at 4% and warned that risk in the financial markets may make it hard to determine the economic impact on the 13 countries that use the Euro. The bank decided to hold off on raising interest rates as inflation reached the 3% mark in November and manufacturing gauges increased in November, a sign of the euro's strength against the dollar. "The economic fundamentals of the euro area remain sound," said European Central Bank president Jean-Claude Trichet, according to a statement. "However, the reappraisal of risk in financial markets is still evolving and is accompanied by continued uncertainty about the potential impact on the real economy." Meanwhile, The Bank of England decided to cut interest rates in the first time in two years by a quarter-point to 5.5%, amid fears that deteriorating financial markets and the credit crunch will hurt economic growth. The rate cut, which was the first since August 2005, follows five hikes since August 2006. "Although output in the United Kingdom has expanded at a brisk pace for the past two years, there are now signs that growth has begun to slow," the Bank of England said in a statement.