The European Central Bank is still likely to raise the interest rate in September, as it had previously signalled, despite the turmoil in financial markets, Trevor Williams, Chief Economist at Lloyds TSB Corporate Markets, told "Worldwide Exchange."
The U.S. Federal Reserve on Friday cut the discount rate at which it lends directly to commercial banks to quell the liquidity squeeze in the credit markets, a move seen by some market players as a last step before lowering its benchmark federal funds rate.
Williams said the ECB was unlikely to follow suit. "The ECB has been pumping a lot of liquidity into the European money markets and I suspect part of the reason is that they do still want to go with the move in September that they had already signalled," Williams said.
He said growth in the eurozone was still strong while unemployment was still falling, so the ECB would be keen to go ahead with the decision they had planned.
"They may delay the rate rise but they may not want to," Williams said. "It depends on how the market performs, but I suspect for the moment they are still on track to raise rates."
The euro was up against the dollar and against the yen in morning European trade.