ECB Holds Interest Rate Steady

June 4, 2009 by Trader Rich

Euro zone keeps rate at 1%

The European Central Bank is holding its interest rate steady at 1% today. Even after after the announcement, the euro continued to pull back against the U.S. dollar.

Even though, usually, a higher interest rate is a good sign, the euro has been repeatedly penalized in forex trading over the past few months for not taking aggressive enough action to ease economic troubles in the euro zone. There is a general feeling that ECB policy makers are not taking an active enough role in economic stimulus.

However, the euro zone has seen some improvement in the economic situation since the year’s start, and this is being used as justification by ECB leaders for not needing to cut rates further at this time. Indeed, it may be that the euro zone does not cut rates further at all, since it is widely believed that 1% is the floor.