Central banks of Europe, Britain to take action to shore up economy

Analysts expect the UK's central bank, the Bank of England, to announce Thursday that it will inject another 50 billion pounds (US$79 billion) of new money into an economy that shrank at the end of last year.

Meeting the same day at its headquarters in Frankfurt, Germany, the European Central Bank is expected to trumpet the advantages of its second unlimited offering of cheap, three-year loans to be allotted to banks on Feb. 29.

Neither central bank is expected to change interest rates from their current record lows — the Bank of England at 0.5 percent and the ECB at 1 percent. Rather, attention will focus on their outlooks and their attempts to push more money into the banking systems and the economy.

A first blast of cheap ECB credit — 489 billion euros (US$641.23 billion)— was taken up by 523 banks on Dec. 23. The step has been credited with calming some of the market panic from the debt crisis hitting the 17 countries that use the euro, and stocks and government bonds have risen since then. Analysts think the takeup could equal or exceed the first one, since the ECB has loosened collateral requirements.

Despite a remarkable easing in tensions on financial markets this year — particularly evident in the big drop in the borrowing rates of weak countries like Italy and Spain — the 17-country eurozone and the UK face worrying signs from the wider economy.

Subscribe to The China Post and save 25%. Click here

PrintEmail

Write a Comment

Terms

Enter your comments - 3000 characters max

Type in image code

Submit

 Receive China Post promos
 Respond to this email