Economy Set to Grow While Offshore Interest Rates Look to Stay Low

As was predicted in a recent Reuters poll, after a meeting on the 6th August the European Central Bank (ECB) have announced they will be keeping interest rates on hold at 1 percent. Holding the rates for the foreseeable future is seen to be good news for the European economy in general, but is also great for those with a keen eye on offshore interest rates currently.

The ECB lowered its interest rate to 1 percent (its lowest rate in 11 years) in May this year, after moving it to 2.00 percent in January, 1.50 percent in March and 1.25 percent in April. By comparison, its highest rate of 4.25 percent came into effect way back in June, 2000.

In a press conference following the announcements, ECB president Jean Claude Trichet said: "Economic activity over the remainder of this year is likely to remain weak, although the pace of contraction is clearly slowing down. While uncertainty is still high... and we have to be prepared for ongoing volatility in incoming data, there are increasing signs the global recession is bottoming out. Looking ahead into next year, after a phase of stabilisation, a gradual recovery with positive growth rates is expected,"

The ECB's decision to hold interest rates at 1 percent will also be of interest to those with or considering offshore bank accounts. In a recent Reuters poll of economists and experts, all 75 of those asked predicted that rates would be kept at one percent, with many estimating that they will not be set to rise again until the fourth quarter of 2010.

Of course, if the predictions of those in the Reuters poll turn out to be correct, offshore savings accounts will begin to look very tempting again especially if UK banks begin to push up rates despite the Bank of England's seemingly comfortable 0.5 percent. However, expats may also be more inclined to consider an offshore account after Sterling's fall when the Bank of England announced quantitative easing on the 6th August, as the Euro stood firm when the ECB said it was holding its rates.

Paul Roberts writes about finance, offshore savings and offshore interest rates.