ECB keeps key rate unchanged at 1%

Posted By: Religare
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ECB keeps key rate unchanged at 1%
The European Central Bank (ECB) on Thursday kept its benchmark interest rate unchanged amid easing concerns over the Eurozone debt crises and stabilization in business activity in the region.

Following two straight rate cuts, the central bank kept its benchmark rate, the interest rate on the main refinancing operations unchanged at a record low of 1 per cent.

“According to some recent survey indicators, there are tentative signs of a stabilization in activity", the ECB said, adding that “economic outlook remains subject to high uncertainty and substantial downside risks".

While French and Italian industrial output expanded in November 2011, business confidence in France also rose in December 2011, easing concerns over the Eurozone debt crises.

Falling borrowing costs for Italy and Spain also signal an improvement in investor confidence in the Eurozone economy.

Moreover, the central bank's injection of record cash in the Eurozone banking system last month has also eased funding strains for the region's banks and is supporting economic confidence.

The ECB injected a record 489 billion euro into the region's banking system last month to boost credit growth.

“We continue to expect euro area economic activity to recover, albeit very gradually, in the course of 2012, supported by developments in global demand, very low short-term interest rates and all the measures taken to support the functioning of the financial sector", the ECB said.

“The provision of liquidity and the allotment modes for refinancing operations will continue to support euro area banks, and thus the financing of the real economy", the central bank added.

Dion Global Solutions Ltd

Read more about: euro zone, economy, interest rate
Story first published: Friday, January 13, 2012, 23:31 [IST]
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