ECB Keeps Key Rate at Record Low


The European Central Bank left interest rates at a record low and may signal it’s in no rush to withdraw emergency stimulus measures as the economy shows signs of recovering from its worst recession since World War II.

ECB officials meeting in Frankfurt today kept the benchmark rate at 1 percent. The central bank, led by President Jean- Claude Trichet, won’t raise rates before the third quarter of 2010, another survey shows.

The ECB is wary of nipping the nascent euro-region recovery in the bud by tightening policy too soon. While the bank is likely to raise its forecasts for economic growth today after Germany and France unexpectedly exited their recessions in the second quarter, rising unemployment and the expiry of government rescue packages may damp expansion next year.

Sweden’s Riksbank today held its benchmark rate at a record low of 0.25 percent and pledged to keep it there until autumn next year. Trichet will discuss the next step in the global response to the financial crisis when he meets officials from the Group of 20 nations in London tomorrow.

While the Federal Reserve and Bank of England are pumping money directly into their economies through the purchase of government and corporate bonds, the ECB has focused on lubricating bank lending in an effort to rekindle growth.

In June it offered lenders as much cash as they wanted for 12 months at its benchmark rate, resulting in a record allotment of 442 billion euros ($629 billion). Trichet has kept open the option of charging a higher interest rate at the next 12-month tender on Sept. 29.


TradingEconomics.com, Bloomberg
9/3/2009 9:09:51 AM