ECB torn on direction for Euro
The European Central Bank must decide whether to raise or lower euro interest rates. Stephen Beard reports on the many factors at work, including the price of oil and the euro's fast rise against the U.S. dollar.
A large euro symbol in front of the European Central Bank (Martin Oeser/AFP/Getty Images)
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Doug Krizner: It's a big day for many of the world's central bankers. Fed Chairman Bernanke's addresses the Joint Economic Committee in Congress. The Bank of England has a meeting on interest rates. So does the European Central bank. As Stephen Beard reports from London, the ECB is walking a tight rope.
Stephen Beard: The European Central Bank is torn. On the one hand, it's worried about inflation -- partly due to the soaring price of oil. That suggests the bank should put up euro interest rates to curb demand.
But on the other hand, the Bank is concerned the euro's been rising fast as the dollar falls. And that suggests that it should move to lower euro interest rates, says economist Andrew Hilton:
Andrew Hilton: It's got the problem that the super strength of the euro is really hitting European exports. And therefore, it would like to cut interest rates.
But lower euro interest rates might further fuel inflation in the eurozone.
Many European policymakers blame the U.S. for this dilemma, for allowing the dollar to decline. Yesterday, French President Nicolas Sarkozy, addressing a joint session of the U.S. Congress, said the weak dollar could lead to protectionism and economic war.
In London, this is Stephen Beard for Marketplace.
