Fragile recovery keeps rate hike off the table

The eurozone economy emerged from recession during the second quarter of this year, and subsequent data suggests the recovery story is gathering some momentum. The recovery is being led by Germany and France, which together account for around 50% of the eurozone, but other countries, including Ireland, are also showing tentative signs of recovery.

However, as is normally the case, with every upside there is also a potential downside. In this case the potential downside is that a recovery in growth could prompt the ECB to move its key official interest rate up from its historically low level of just 0.5%.

Given the fragility of the Irish economy, and the heavily indebted nature of the personal and business sector, such an increase in rates would be about as welcome as snow in August.