VIENNA, Oct 4, 2007 (AFP) – The European Central Bank was set to hold interest rates steady Thursday amid concern that the euro’s strength and a slowing economy were stirring up stiff headwinds for the 13-nation eurozone. The Bank of England was expected to leave its main lending rate unchanged as well, at 5.75 percent after recent financial markets turmoil forced the central bank to rescue troubled lender Northern Rock.
ECB governers gathered in Vienna will scan the horizon for signs of growing inflation but could also report tighter credit conditions than when they met a month ago and left the bank’s benchmark rate at 4.0 percent.
“The strong euro and the persistant dislocations in the money and credit markets will likely force the ECB to keep rates on hold for the foreseeable future,” Bank of America analysts said Wednesday.
“The markets have done the work of tightening eurozone monetary conditions for the ECB,” they added in reference to the effects of global banking upheaval that followed a meltdown of the US market for high-risk mortgages.
A poll of 30 economists by AFP/Thomson Financial News was unanimous in its forecast for no change in the rate that determines borrowing costs for a region that