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European Central Bank-ECB raises Key Policy Rates-VRK100-08042011

European Central Bank-ECB raises Key Policy Rates-VRK100-08042011

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The article was updated by Rama Krishna Vadlamudi, Hyderabad, after ECB raised its key interest rate from 1.00% to 1.25% effective April 13, 2011. This article discusses the key policy interest rates of the European Central Bank (ECB) headquartered in Frankfurt, Germany. It also discusses the intricacies involved with several terms, like, euro area, eurozone, EU, european union, eurosystem, EU enlargement, EU member countries, countries that adopted euro as national currency, etc. It showcases the mechanism involved in setting up rates by ECB. Estonia has become the 17th member of the eurozone adopting euro as its national currency from January 1, 2011.
The article was updated by Rama Krishna Vadlamudi, Hyderabad, after ECB raised its key interest rate from 1.00% to 1.25% effective April 13, 2011. This article discusses the key policy interest rates of the European Central Bank (ECB) headquartered in Frankfurt, Germany. It also discusses the intricacies involved with several terms, like, euro area, eurozone, EU, european union, eurosystem, EU enlargement, EU member countries, countries that adopted euro as national currency, etc. It showcases the mechanism involved in setting up rates by ECB. Estonia has become the 17th member of the eurozone adopting euro as its national currency from January 1, 2011.

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Published by: RamaKrishna Vadlamudi on Sep 24, 2009
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Rama Krishna Vadlamudi HYDERABAD April 08, 2011 * 
On April 7, 2011, the European Central Bank, headquartered in Frankfurt, raised the key interest rates in the Eurozone to 1.25 per cent from 1.00 per cent effective April 13, 2011. This is the key rate through which ECB provides the bulk of the liquidity to the banking system in the Eurozone. The key rate, officially called the Refinancing Rate, was last revised in May 2009. The rate hike was signaled by Jean-Claude Trichet, ECB President, last month itself and hence the rate hike did not surprise the markets.
* This is the third revision of the original document dated September 21, 2009.
 
Rama Krishna Vadlamudi, HYDERABAD April 8, 2011
www.scribd.com/vrk100 vrk_100@yahoo.co.in
 
MY BLOG: www.ramakrishnavadlamudi.blogspot.com 
Page 2 of 5
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
th
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.
 
Rama Krishna Vadlamudi, HYDERABAD April 8, 2011
www.scribd.com/vrk100 vrk_100@yahoo.co.in
 
MY BLOG: www.ramakrishnavadlamudi.blogspot.com 
Page 3 of 5
European Central Bank (ECB):
The European Central Bank was established on June 1, 1998. The ECB sets the interest ratesand is responsible for the single monetary policy of the euro area. It is headquartered in Frankfurt,Germany. It is part of the eurosystem.
Eurosystem:
Eurosystem is the central banking system of the euro area. The ECB and the national centralbanks of the European Union (EU) member states that have adopted the ‘euro’ as their commoncurrency are part of the eurosystem.
Euro area (or Eurozone):
Those EU member states that have adopted the ‘euro’ as their single currency are part of theeuro area. A single monetary policy for the euro area is conducted by the ECB under theresponsibility of the Governing Council of the ECB. It is informally known as Eurozone, while theofficial name is euro area. The ‘euro’ was launched on 1 January 1999 on foreign exchangemarkets, and euro currencies replaced national currencies on 1 January 2002.There are now 17 European countries which are members of the eurozone, with a commoncurrency, the euro, and a single interest rate set by the European Central Bank (ECB). Estonia isthe seventeenth country to adopt ‘euro’ as its common currency with effect from January 1, 2011.The list of these 17 EU member countries that have adopted ‘euro’ as their single currency aregiven in the annexure on page four. They make up of around three-fourths of EU’s GDP. Thefollowing graphic shows 15 countries that adopted ‘euro’ before 2009.
Note: The micro-states of Monaco, San Marino and Vatican City also use the euro, on the basis of a formal arrangement with the European Union. Andorra, Montenegro and Kosovo likewise use the euro, but without a formal arrangement.

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RamaKrishna Vadlamudi added this note
This article originally written on September 21, 2009 is revised on January 6, 2011 after Estonia joined eurozone on January 1, 2011.
RamaKrishna Vadlamudi added this note
The article was updated on April 8, 2011, after the ECB raised its key policy interest rate from 1.0% to 1.25% with effect from April 13, 2011. This is the third revision of the original article published on September 21, 2009.
RamaKrishna Vadlamudi added this note
Dear Reader, If you want to know about Eurozone, the birth of Euro, how many countries are using Euro, the interest rates of European Central Bank, THIS ARTICLE HAS GOT EVERYTHING YOU WANTED TO KNOW!---rama krishna v, MUMBAI.
RamaKrishna Vadlamudi added this note
The article was updated on April 8, 2011, after the ECB raised its key policy interest rate from 1.0% to 1.25% with effect from April 13, 2011. This is the third revision of the original article published on September 21, 2009.
RamaKrishna Vadlamudi added this note
This article originally written on September 21, 2009 is revised on January 6, 2011 after Estonia joined eurozone on January 1, 2011.
RamaKrishna Vadlamudi added this note
Dear Reader, If you want to know about Eurozone, the birth of Euro, how many countries are using Euro, the interest rates of European Central Bank, THIS ARTICLE HAS GOT EVERYTHING YOU WANTED TO KNOW!---rama krishna v, MUMBAI.
RamaKrishna Vadlamudi added this note
The article was updated on April 8, 2011, after the ECB raised its key policy interest rate from 1.0% to 1.25% with effect from April 13, 2011. This is the third revision of the original article published on September 21, 2009.
RamaKrishna Vadlamudi added this note
This article originally written on September 21, 2009 is revised on January 6, 2011 after Estonia joined eurozone on January 1, 2011.

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