ECB keeps rate at 1%

While already the lowest, the European Central Bank has once again decided to keep its interest rate at 1%.  The Financial Times is reporting that while the news has been anticipated by many, there wasn’t much expectation of the ECB announcing additional efforts to help the region.  The ECB chairman Jean Claude-Trichet said the rate is appropriate for now.  Other remarks made by Trichet involved unemployment, via WSJ:

Mr. Trichet said he expects economic activity in the 16-member euro zone to remain weak for the rest of the year and unemployment — which hit a decade-high level of 9.5% in May — to continue to rise until the middle of 2010. Upward price pressures will “remain dampened over the policy horizon,” he added.

He also remarked on the economic contraction saying it is partly due to supply instead of demand.  Apart from this, other news talk about the ECB seeing its inflation turn negative, surpassing its target of 2%.

They showed 2010 inflation in a range between 0.6 per cent and 1.4 per cent. Such low levels would usually justify further ECB monetary policy action.

The last action performed by the central bank has been the infusion of €442bn this week in one-year loans.  As far as I can remember, there will be two more following later in the year.

Read more via the FT HERE.

Or via WSJ HERE.


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