FRANKFURT — The European Central Bank and the Bank of England on Thursday left their interest rates unchanged, and the ECB said it did not expect the London terrorist attacks to have a significant economic impact.
Jean-Claude Trichet, ECB president, said he had spoken to other central bankers during the day, and had confirmed that financial markets were functioning.
Trichet added, however, that the ECB was ready to act swiftly if necessary.
Trichet said the ECB's role was to stick to its mandate of ensuring price stability, to maintain confidence and "keep appropriate calmness". The ECB's main rate remained at 2 percent for the 25th consecutive month.
Its governing council, meeting for its regular monthly rate-setting council, observed a minute of silence in memory of the victims of the terrorist attacks.
In 2001, within a week of the September 11 terrorist attacks in the US, the ECB had called an unprecedented emergency council meeting and cut interest rates by half a percentage point, following the lead of the U.S. Fed.
But on Thursday Trichet said that he did not expect the events in London would have a "significant impact" on economic growth. Trichet signaled little change in the ECB's overall monetary policy stance. A month ago, amid signs that eurozone growth was slowing, he had indicated for the first time that a rate cut from the current low rates was possible. On Thursday Trichet repeated that he was not "pre-announcing" either a rate cut or a rate increase.
Trichet said the most recent data pointed to a "slight improvement" in the growth outlook. But the balance of risks for growth still lay "on the downside", he said, and there were "no signs as yet that a more sustained recovery in economic activity has already started."
The ECB's concern about inflationary dangers appeared to have heightened as a result of higher oil prices. Trichet said the annual inflation rate might not fall below its price stability definition of "below but close" to 2 percent in the remainder of 2005.
He warned that the ECB would have to "take into account" the inflationary effects of the significant increase in value added tax being considered by Germany's opposition Christian Democratic Union if it wins federal elections expected in September.
The Bank of England on Thursday left its main interest rate unchanged at 4.75 percent. Although a cut in U.K. rates is expected, economists said the bank would want to wait for more information before such a step.
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