Bank of England keeps rates on hold but ECB signals a rise

As widely expected, the Bank of England left the Bank Rate at 0.5 per cent yesterday, and kept its "quantitative easing" programme, which has pumped £200bn into the economy since 2009, on hold.

Analysts could read little into the Bank's announcement, as they will have to wait a further 10 days for the minutes and voting details, but were more exercised by the European Central Bank's signal that it will hike rates for the second time this year at its July meeting, though it left its benchmark rate at 1.25 per cent. A statement that "strong vigilance" is required was taken as code for a rise to 1.5 per cent in a few weeks. Such a move will add to the difficulties facing the distressed economies of Europe's periphery, especially in Spain's poleaxed property market and small banks.

Yet the ECB president, Jean-Claude Trichet, also indicated his continuing opposition to any restructuring of Greek debt. Speculation about this has been heightened by the leak of a letter by Germany's Finance Minister, Wolfgang Schäuble, suggesting that such a move might be the least worst option for the German government. Berlin has long believed that private-sector bond holders must "share the pain" if the eurozone launches another rescue package. A further €100bn (£89bn) package is expected to be approved by EU leaders later this month.

For the UK, the flipside of depressed readings on consumer spending and confidence was brighter trade figures. There was a sharp fall in imports of consumer goods and cars in April, though the volume of goods exports fell by more than imports – 2.4 per cent against 1.6 per cent. Overall, including services, the deficit was stable at £2.8bn in April, with the March deficit revised from £3bn to £2.8bn, keeping the trade data on a gradually narrowing trend.