European Union growth expected to slow down, key interest rate kept unchanged at 4 percent

The European Union cut its economic forecasts for the next two years, saying oil prices and turmoil in financial markets brought on by the subprime mortgage debacle in the United States would significantly cut growth. The European Commission expect inflation to accelerate faster than previously anticipated as energy and food costs soar.

The economy of the 13 nations that share the euro will expand 2.2 percent next year, the Brussels-based commission said on 9th November 2007 in its autumn forecasts, 0.3 percentage point lower than it predicted in May. The pace of growth will ease further in 2009, to 2.1 percent, it said.

The ECB on 8th November 2007 has left its key interest rate at 4 percent and said that both inflation and the euro's advance against the dollar are cause for concern. The euro gained 15 percent against the dollar in the last year and reached a record $1.4731 Nov. 7. Measured against an index of the euro area's 24 main trading partners, the currency has risen 6.3 percent in that period.

At the same time the Bank of England left UK interest rates on hold for the fourth month in a row.

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