ECB holds eurozone interest rates at 1.0%

04 November 2010 12:49  [Source: ICIS news]

LONDON (ICIS)--The European Central Bank (ECB) held interest rates at 1.0% for the 16-nation eurozone on Thursday for the 18th consecutive month, despite fears over debt problems facing some of its members and a move by the US Federal Reserve to inject more money into the economy.

The US Federal Reserve said on Wednesday that it would purchase $600bn (€426m) worth of Treasury Department securities in a bid to lower long-term interest rates, noting that the US economic recovery had been disappointingly slow.

However, the Frankfurt-based central bank has said it intends to continue withdrawing its emergency measures.

Also, disagreement has been prevalent within the eurozone about the way the economy is run as Germany has far outpaced debt-ridden nations such as Portugal, Ireland and Greece.

The bloc has seen a rise in manufacturing output, albeit at a slower pace during the second half of the year. Economic sentiment has exceeded expectations and inflation in the eurozone rose to 1.9% last month, just below the ECB's target of 2.0%.

But ECB policy makers from Germany, Luxembourg, Belgium, Austria, Italy and the Netherlands have warned against keeping interest rates too low for too long.

The bank cut its key rate several times from the October 2008 level of 4.25% as it tried to take Europe's economy out of deep recession. The interest rate has remained at 1.0% since May 2009.

Earlier, the Bank of England announced it would hold interest rates at 0.5% for the 20th consecutive month and leave its quantitative easing policy unchanged.

($1 = €0.71)

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By: Hilde Ovrebekk
+44 20 8652 3214

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