FRANKFURT -- The European Central Bank held its main refinancing rate as expected at 3.0% Wednesday at the last gathering of the 17-member Governing Council before the holidays.
Without a press conference scheduled to divulge details of the council's discussions and on the heels of the ECB's 50-basis-point
hike in November, the meeting's outcome was all but a foregone conclusion. The meeting was brought forward by a day, so ECB President
could attend the
Group of 20
summit of finance ministers and central bankers Thursday in Berlin.
One point of concern for Europe's monetary authorities might have been that the euro continues to sit precariously just above parity to the U.S. dollar heading into year-end. The possibility remains that Y2K fears will cause the euro to slip as people the world over stock up on familiar, safe greenbacks just in case computer glitches cause a liquidity crunch.
However, as the euro dipped below the dollar for the first time ever several weeks ago, Duisenberg and his cohorts seem rather nonchalant about the whole thing, so there's a good chance Wednesday's meeting was simply a chance to discuss their favorite eggnog recipes instead. The euro recently traded at $1.0026.
Even if the soon-to-be-released November M3 money supply figures come in showing continued robust growth, it will likely do little to dampen the central bankers' holiday cheer. That's because the ECB decided to hold its reference value for the euro area's M3 growth rate at 4.5% two weeks ago, despite money supply cruising at more than 6% in recent months. However, should things continue at such a torrid pace, some ECB watchers expect that the bank could raise interest rates again as early as sometime in the first quarter of next year.
The ECB sets monetary policy for Germany, France, Italy, Spain, Portugal, the Netherlands, Belgium, Finland, Luxembourg, Ireland and Austria. M3 includes cash in circulation, short-term deposits, repo operations and money-market funds.