Europe Raises Rates

For the first time since 2000, the European Central Bank raised interest rates. Just like our Fed, it wasn’t a big move—from 2.0% to 2.25%. Nevertheless, it represents a major change in policy. Although, the Euro Fed did say that it’s undecided if there will be a series of rate hikes, ala Greenspan.
For the first time, we may see some grumblings about a unified currency. Dominique de Villepin, the sometimes poet and full-time Prime Minister of France said that he wanted “nothing to be done that would undermine growth in Europe.” By Europe, he really means France. As the rioting may indicate, the French economy isn’t doing too well, and I’m sure many businesses and consumers there would be happy to see rates, and their cars, left alone. The unemployment rate in France is 9.3%—nearly twice what it is here.
The EU reported that unemployment in countries using the euro is at 8.3%. The highest is in Poland at 17.6%. The lowest is in, believe it or not, Ireland at 4.3%. Higher rates may help the euro against the dollar. As you can see from this chart, the dollar has beaten up on the euro for much of the year.

Posted by Eddy Elfenbein on December 1st, 2005 at 11:10 am

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