ECB keeps rates on hold despite slowing growth
February 5th, 2009 - 11:59 pm ICT by IANSFrankfurt, Feb 5 (DPA) The European Central Bank (ECB) kept interest rates on hold at two percent Thursday but left open the door for a reduction in borrowing costs when it meets next month.Speaking at a press conference following the bank’s governing council meeting, ECB chief Jean-Claude Trichet said he was not excluding a rate cut at the March meeting.
Trichet went on to say that ” two percent is not the lowest level” but said that “zero interest rates is not something we think is appropriate”.
He told reporters that “inflationary pressures are diminishing” as the world economy faces up to “a significant downturn” amid signs of tighter credit and exceptionally high financial uncertainty.
The ECB chief said that the bank’s 22-head rate-setting council will have a lot of additional information, including the bank’s new staff projections on economic growth and inflation.
The Frankfurt-based ECB’s decision to to take a break in its rate-cutting cycle comes after the bank delivered a hefty 50 basis points cut last month as it faces up to what the International Monetary Fund (IMF) believes will be the global economy’s worst downturn in 60 years.
The ECB’s 22-head rate-setting council’s decision to sit tight on rates was in line with forecasts from analysts, who expect dwindling inflation and slumping economic growth will force the bank to reduce borrowing costs possibly to an historic low of 1.50 percent next month.
The bank has cut the cost of money by a total of 225 basis points since October. Thursday’s ECB meeting in Frankfurt came in the wake of the Bank of England (BoE) announcing in London a 50-basis points cut in the cost of money, which brought rates in the European Union’s second biggest economy down to one percent.
Meanwhile, annual eurozone inflation dropped to its lowest level in about a decade in January, tumbling more than forecast to 1.1 percent on the back of falling oil prices and a slowing economy.
At eight percent, eurozone unemployment is now at its highest level in more than two years with companies having cut production and laid off workers across the currency bloc.
Figures published while the ECB was deliberating Thursday showed key German factory orders plunging by 27.7 percent year on year in December.
As a consequence, economists believe that a steady stream of grim eurozone economic data will result in the ECB also continuing to trim rates in the coming months.
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- Europe's inflation plunge adds to rate cut pressure - Jan 06, 2009
- European inflation falls as oil slides: analysts - Oct 31, 2008
- No pickup for eurozone economies before 2010, says central bank - Apr 09, 2009
- ECB cuts rates to historic low to spur growth - Apr 02, 2009
- European Central Bank cuts rates to historic low - May 07, 2009
- Europe's central bank unlikely to change interest rates - Aug 06, 2009
- European inflation slips back amid signs of slowing economies - Sep 15, 2010
- Europe's leading banks to cut interest rates to historic lows - Mar 05, 2009
- Europe slumps into deflation in June - Jun 30, 2009
- South Korea's central bank leaves interest rates unchanged - Oct 13, 2011
- British unemployment to rise to nearly 3 million - Dec 29, 2011
- US economic growth accelerates - Jan 28, 2012
Tags: bank of england, basis points, boe, downturn, ecb, economic growth, european union, eurozone, financial uncertainty, global economy, governing council meeting, inflation, inflationary pressures, international monetary fund, international monetary fund imf, jean claude trichet, oil prices, perc, world economy, zero interest
