FRANKFURT, April 7: The European Central Bank held its key rates steady at the historically low level of 2.0 per cent for the 22nd month in a row on Thursday as the economic gloom over the 12-country eurozone deepened following recent disappointing data. The ECB, which has now left its key “refi” refinancing rate unchanged at 2.00 per cent since June 2003, also held its other two key rates — the deposit rate and the marginal lending rate — steady at 1.00 per cent and 3.00 per cent respectively.
The ECB’s decision came just 45 minutes after the Bank of England also announced it was holding its own rates unchanged at 4.75 per cent for the eighth month on a row.
Recent comments by top ECB officials have suggested that some of the bank’s policy-setting governing council would like to tighten monetary conditions to nip in the bud potential inflationary threats from strong money and credit growth and the lax fiscal policies of many eurozone governments.
Record high oil prices are a source of concern for the monetary authorities, since they could fuel headline inflation.
But faltering growth in the single-currency area seems to be staying the bank’s hand on rates for the time being.
Speaking at the regular monthly news conference after the rate-setting meeting, ECB President Jean-Claude Trichet said that while there were “upside risks to price stability” there had been “no discussion” of a possible rate hike at this week’s meeting.
“There was no discussion” about raising borrowing costs, Trichet candidly told journalists. On the other hand, a possible cut in rates to help kick-start the stymied economy was “not an option” either, he said.
All in all, the conditions remained in place for “moderate” growth of the euro-area economy, even if recent data had been “mixed,” Trichet insisted.
But he did sound slightly more cautious, saying that there were “no clear signs as yet of a strengthening in underlying dynamics.”—AFP
