ECB leaves rates unchanged as economic activity slows

The European Central Bank left interest rates unchanged at 4%. The decision was widely expected and financial markets were unmoved by the decision as the ECB tries to balance the need to bring down inflation with evidence of a slowing economy. Consumer sentiment in the continent remains poor and economic output has declined due to less activity in the services sector. Although there was no change in rates at this meeting, the ECB said it is still committed to keeping rates high to ensure inflation is brought under control.

There is a similar picture in the UK although the decline in the services sector was offset by an increase in manufacturing activity. The unemployment rate in the UK increased to 4.2%, however, the Office for National Statistics has changed the way it calculates its employment data and warns the new figures are what it calls “experimental”. This leaves the Bank of England facing the same dilemma as the ECB at its interest rate meeting next week.

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