Markets in Europe

摘要

Persisting in its perverse view that the deflationary effects of rising oil and commodity prices present an inflationary threat to the euro-zone, the European Central Bank (ECB) raised interest rates on June 8, although thankfully only by 0.25 percent - to 2.75 percent - after seriously considering a 0.5 percent increase. Oblivious of its inconsistency, at the same time the ECB lowered its forecast of GDP growth in 2007 from 2 percent to 1.8 percent precisely because of the likely impact of higher oil prices. Euro-zone finance ministers fear that even a small rise in rates will add excessively to the relative attractions of the currency which could push its rate against the US dollar to 1 euros=1.30dollars - it has been running at 1.28 dollars. For one reason or another domestic demand is still languishing in the main economies and a rising exchange rate imperils the export-led growth on which the zone's weak recovery still depends. The ECB's move has not shaken business confidence, perhaps because an increase of as much as 0.5 percent had been long expected.