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ECB leaves rates on hold
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March 30, 2000: 6:51 a.m. ET
European Central Bank holds key rate at 3.5%; euro continues to struggle
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LONDON (CNNfn) - The European Central Bank left its key interest rate unchanged at 3.5 percent Thursday, as expected, leaving the euro no stronger than before the announcement.
While the euro has weakened against other major currencies, setting a record low against the yen Wednesday, economists said that raising rates would have had a negative impact.
"We have been here before," said Alison Cottrell, international economist at PaineWebber International in London, referring to two earlier slides in the single currency in February and early March.
The ECB already this year has raised its rates in two quarter-point hikes, with members remaining sanguine about the euro's steadfast refusal to move back above parity with the dollar.
"A rate-hike response by the ECB would not have achieved much [and would have been] counter-productive in slowing European growth," Cottrell added.
Growth in the 11-nation euro-zone is expected to reach 2.9 percent this year, but recent survey evidence has highlighted the fragility of the region's recovery while inflationary pressures remain.
The influential Insee survey of French business confidence came in below expectations this week, while money-supply growth of 5.9 percent in January remained well ahead of the ECB's 4.5 percent target rate.
 In currency markets, the euro gained some ground after falling for two days. It was quoted at $0.9555 after the ECB decision compared with $0.9565 shortly before the interest rate announcement and up from $0.9519 in New York Wednesday. Against the yen, the single currency climbed to ¥100.34 from ¥100.70, having hit a record low of ¥100.05 in New York.
The Bank made no comments alongside its decision, released at a meeting in Madrid. The council usually meets in Frankfurt, and the announcement at one of its irregular "road shows" had added to the expectation that rates would be left on hold.
The consensus among economists is that inflationary pressures will still lead the Bank to boost rates again before the end of the year's second quarter.
"There is clearly more tightening just around the corner," said Cottrell. 
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European Central Bank
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