Thursday, September 6, 2012

ECB keeps interest rate on hold at 0.75%

    The European Central Bank (ECB) kept its benchmark refinancing rate unchanged at 0.75 percent, a decision that will surprise those in financial markets that had expected the bank to trim its rates.
    The ECB said in a statement that it would issue further comments on its decision later today. The ECB is widely expected to provide details of its plan to purchase government bonds to push down the rates that some of the countries in the 17-nation area, such as Spain and Italy, are paying on their debt.
    The ECB cut its refinancing rate by 25 basis points to 0.75 percent in July.
    The bank also kept the interest rate on its deposit facility at 0 percent. Some economists had speculated the ECB would follow the Danish central bank's recent move to lower it to negative - so banks would have to pay to leave money at the central bank - in order to encourage banks lend more.
    The inflation rate in the euro zone was steady at 2.4 percent in July. The ECB aims at inflation rates of below, but close to 2 percent over the medium term.
    The euro zone's economy contracted by 0.20 percent in the second quarter from the first quarter for an annual contraction of 0.5 percent in area's gross domestic product. In the first quarter, the size of the economy was unchanged from the fourth quarter of 2011 but on an annual basis GDP shrank by 0.1 percent.


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