Europe, U.K. keep rates steady

Amid signs of inflation, European Central Bank today left its key interest rate unchanged at 4.0%. The Bank of England likewise held interest rates steady at 5.5%. Interest rates on the marginal lending and deposit facilities will remain at 5.0% and 3.0%, respectively, according to an announcement from the ECB. Short-term pressure on inflation continues to climb, as the Harmonised Index of Consumer Prices (HICP), a key inflation indicator, remained at 3.1% in December, ECB president Jean-Claude Trichet said at a press conference. Hinting at the possibility he may raise rates in the future, Mr. Trichet said, “The Governing Council remains prepared to act preemptively so that second-round effects and upside risks to price stability over the medium term do not materialize.” Despite the fact that real gross domestic product growth is in line with trends, prospects for economic growth remain uncertain, Mr. Trichet noted. Risks in the form of oil and commodity price spikes, as well as “concerns about protectionist pressure” are all potential problems. Meanwhile, there are medium-term risks for price developments related to rapid growth. Unemployment rates have fallen to rates that haven’t been seen in 25 years, but if wages grow at an unexpectedly strong rate, problems could appear. The Governing Council is watching wage negotiations in the eurozone to preserve price stability.