Wednesday, June 6, 2012

ECB keeps rate at 1 pct, acknowledges growing risks

    The European Central Bank held it's key interest rate unchanged at 1.0 percent and continued to give banks a full allotment in its main refinancing operations "for as long as necessary." Most economists had expected the ECB to maintain rates but with Europe's economy continuing to contract and Spain facing tight credit markets, some analysts had held out hope for a rate cut. 

    ECB President Mario Draghi said in a statement that inflation was likely to stay above 2 percent for the rest of this year but uncertainty was weighing on confidence, increasing the downside risks to the economic outlook.
    "In the Governing Council's assessment, the economic outlook for the euro area is subject to increased downside risks relating, in particular, to a further increase in the tensions in several euro area financial markets and their potential spillover to the euro area real economy. Downside risks also relate to possibly renewed increases in commodity prices over the medium term," Draghi said.


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