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Europe, UK hold rates
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August 3, 2000: 8:03 a.m. ET
European Central Bank and Bank of England stays put on interest rates
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LONDON (CNNfn) - The European Central Bank and the Bank of England left their respective interest rates unchanged Thursday, as expected, but many economists say rate increases are likely later this year.
The ECB held rates at 4.25 percent, but the decline in the euro is adding to inflationary pressures as cheaper imports are sucked into the economy of the 11 counties that have adopted the common currency. Inflation rose to 2.4 percent in June, above the ECB's 2 percent ceiling.
Economists polled by Reuters had predicted unanimously that the ECB would hold rates at Thursday's meeting, but they anticipate the ECB will raise rates this fall in response to strengthening euro-zone economic growth.
The ECB already has lifted interest rates by 1.75 percentage points since last November -- including a surprise half percentage point hike in June -- and the governing board will want to view all of July's data to gauge how the economy is responding.
Earlier Thursday, the Bank of England kept interest rates on hold at 6 percent, although a hike is also expected later in the year. Twenty-five out of 33 economists polled by Reuters had predicted the Bank of England would keep interest rates unchanged at its latest meeting.
The Monetary Policy Committee voted to raise the cost of borrowing four times between September and February in an attempt to slow down the economy. The six months since then marks the second-longest period of unchanged policy since the Bank took control of rates in May 1997.
Some analysts had expected the Bank of England to raise rates Thursday, citing evidence that the British economy sustained healthy growth in the second quarter. GDP rose 0.9 percent from the previous three months, and year-over-year growth totaled 3.1 percent, the highest since the first quarter of 1998.
Strong retail sales growth in June and Chancellor of the Exchequer Gordon Brown's £50 billion spending plans also helped make the case for higher rates.
Average earnings growth fell to 4.6 percent in May from 5.1 percent in April, bringing it close to the BoE's comfort zone of 4.5 percent. The mini boom in housing prices also appears to be coming to an end, and high oil prices, which have fueled the cost of making a wide range of products, fell by almost $3 a barrel in July to about $27 a barrel. 
--from staff and wire reports
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European Central Bank
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