Bottom line

While the United States celebrates its July 4^th Independence Day, investors overseas will be holding vigils while the European Central Bank and Bank of England decide whether they should raise interest rates. The betting is that both will postpone action. The ECB should be gratified that their consumer price index has finally fallen below their ceiling rate of 2 percent. With the euro appreciating, disinflationary pressures from high import prices will also help lower price pressures in the EMU. This should allow the ECB to put rates on hold to foster the anemic recovery in Europe. Similarly, the Bank of England is expected to defer rate action with GDP barely growing in the first quarter, manufacturing finally emerging from recession and inflation under the Bank’s inflation target of 2.5 percent.