The European Central Bank and the Bank of England both held their benchmark interest rates steady and at historic lows on Thursday, June 10.
The European Central Bank (ECB) kept its benchmark rate at just 1% against a backdrop of sizable budget deficits and high levels of public debt in Greece and a number of other European countries. The ECB’s benchmark rate has stayed at 1% for over a year, and any change to that rate was widely unexpected.
The Bank of England held its benchmark rate even lower, at a record low of 0.5% for the 16th consecutive month, as the United Kingdom continues to struggle with a weak economy and the newly elected government’s plan to make large spending cuts. The bank’s Monetary Policy Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at ?200 billion, or $290 billion.
U.S. market participants have been closely watching economic activity in Europe and the U.K. since late last year. In his speech before the U.S. House Budget Committee on June 9, Federal Reserve Chairman Ben Bernanke said the actions taken by European leaders represent a firm commitment to resolve U.S. market stresses and restore confidence