European Central Bank, No Interest Rate Cut

Europe is no Disneyland at the moment.  Still, some data is showing contraction while other data shows that the overall healthier economies may be escaping the worst fears of late 2011 and earlier this year.  So it came without surprise this morning that the European Central Bank decided to leave its interest rates unchanged.

The Refi rate was kept static at 1.0% and the move, or a lack of a move, has not impacted markets.  The ECB has preferred to keep its powder dry in case it starts to see inflation or deflation become a larger risk on top of the current woes that Europe has suffered from the lands of the PIIGS.

Today’s news should be no surprise.  The ECB does not want to get to a near-zero rate target of the 0.00% to 0.25% as is the case in the United States.  At least it still has room to act to cut rates formally rather than through alternative methods as we have seen from our own FOMC in the United States.

JON C. OGG