European Central Bank Holds Rates Steady

The main financing rate is held for now, but worries about inflation and a weak euro may lead to a hike in the future.

Author:: Marc Young
Publish date:: May 25, 2000 12:14 PM EDT

BERLIN -- The

European Central Bank

held its main refinancing rate at 3.75% on Thursday as expected, signaling Europe's monetary authorities believe inflationary pressures remain checked.

The ECB last raised rates by a quarter of a percentage point a month ago as the eurozone's economic rebound quickened its pace and as the euro tested all-time lows against the U.S. dollar. Shortly after the central bankers opted to keep their powder dry Thursday, the euro dipped $0.0004 to $0.9028.

Although most observers expected the ECB to refrain from taking action, some thought the bank might choose to hike rates by a quarter point. Such a change in monetary policy could still come as soon as the next meeting of the bank's

Governing Council

two weeks from now, as the central bankers have recently begun to turn their hawkish rhetoric up a notch.

In the ECB's May monthly report released last week, the bank reiterated its concern over "ample" liquidity and the inflationary risks posed by the euro's weakness.

The ECB sets monetary policy for Germany, France, Italy, Spain, Portugal, the Netherlands, Belgium, Finland, Luxembourg, Ireland and Austria.