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Central banks likely to hold interest rates

07-07-2010 09:31 BJT Special Report:

With the exception of India, central banks around the world are keeping interest rates on hold. It seems none are willing to act too soon, in the midst of a complex and uncertain global economic recovery.

It's a complex economic situation.

And one of the biggest questions for central banks is what to do with interest rates.

Raising them tightens liquidity, and risks jeopardising economic growth. Leaving them unchanged or reducing them, can lead to higher inflation.

Most central banks are choosing to wait and see.

The U.S. Federal Reserve announced it was keeping interest rates at a historical low last month.

Europe's central bank is also keeping its interest rate at the lowest point.

Analysts suspect that with the EU tightening fiscal policies, and the US reporting lower-than-expected economic data, rate hikes there are unlikely before next year.

However, developing countries in Asia are looking to increase their interest rates. India's central bank announced it was raising its repurchase rate and reserve repurchase rate for the third time last Friday.

Asian countries like Thailand and South Korea are also expected to raise their rates in the near future.

Analysts say that's due to overheating in the their economies.

Editor:Xiong Qu |Source: CCTV.com

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