By: Mike Cambell
Most analysts believe that the global recovery will be a fragile beast, so it is unsurprising that the European Central Bank has decided to maintain interest rates at 1%. The move was widely expected; indeed most people expect the policy to be maintained well into the year. The policy has been in force for the last eight months and was designed to make cheap money available to business thus helping to prepare the ground for recovery and to encourage spending since money on deposit shows very little return. The policy may be showing the desired effects since industrial production within the Eurozone has managed to come in at twice the expected level. Interest rate policy is also used as a tool to reign in inflationary pressures. With inflation well below the 2% target level, the ECB has a fair amount of room for manoeuvre before it would be forced to increase rates.
He Who Pays The Piper Calls The Tune
US President Barack Obama has announced plans to recover $117bn from the banking sector that was kept afloat by US public funds during the worst ravages of the financial crisis. The money will be recovered by increases in taxation and is likely to be very well received by the general public who blame the financial sector for causing the recession in the first place. The tax is only applicable to financial institutions with assets greater than $50bn; some 50 companies will be affected and it will be spread out over ten years. One is tempted to suggest that the move is another example of the triumph of form over substance in an American election year. Some analysts have already pointed out that the cost to the banking sector is likely to be recouped through higher charges to their customer base, in any event.