Rama Krishna Vadlamudi, HYDERABAD April 8, 2011
MY BLOG: www.ramakrishnavadlamudi.blogspot.com
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Background:Following the global financial crisis that threatened to collapse theglobal economy, key policy interest rates were kept artificially lowerby several central banks, like the ECB, the US Federal Reserve, theBank of Japan, and the Bank of England in the developed world, witha view to giving a big boost to their flagging economies. Now, itseems to be the time to reverse these low-interest rate regimes. TheECB says it is doing a balancing act to curb inflationary threats inEurozone. The ECB is the first central bank in the developed world toraise the interest rates. The ECB also raised its overnight deposit rateto 0.5 per cent and its marginal lending rate to 2.0 per cent effectiveApril 13, 2011.The latest rate increase may not be relished by countries, like,Greece, Portugal and Ireland, because they have been depending onmassive bail-out packages being doled out by ECB to rescue thesecountries from the sovereign debt crisis they are facing. Theeconomies of Greece, Portugal, Spain and Ireland have becomeuncompetitive and they are facing other problems of huge publicdebt, high unemployment rates and massive public unrest.The bigger question now is when will the US Fed and Bank ofEngland start raising their interest rates. With the ECB firing the firstsalvo, the times are very interesting for the currency markets.In another development, Estonia has become 17
member of theEurozone, adopting euro as its currency from January 1, 2011.This article discusses the key policy interest rates of EuropeanCentral Bank (ECB). It also throws light on the intricacies ofEurozone, Eurosystem and such other terms connected with theEuropean Union and its economy. The Eurozone is now facing somesort of a crisis after the global financial crisis of 2008 with several EUnations, like, Greece, Ireland, Portugal and Spain facing economicchaos due to enormous public debt and bankruptcy.