European Central Bank leaves interest rates unchanged at 1%

13 January 2011 12:45  [Source: ICIS news]

LONDON (ICIS)--The European Central Bank (ECB) on Thursday kept interest rates for the eurozone at the record low level of 1.0% for the 20th consecutive month amid a deepening in Europe's debt crisis.

The ECB has been putting pressure on governments in the 17-member eurozone to do more to tackle the debt crisis as prices for goods continue to rise.

The has been speculation over whether the ECB would be able to raise its purchases of bonds to support Portugal, the latest government to come under financial strain.

Spain, which has a much larger economy than Portugal, also faces pressure this week as it holds its first bond auction of 2011.

Last month, eurozone inflation increased to 2.2%, above the ECB’s target of just below 2%.

Price growth and a rise in food prices have raised concerns in Europe. But market analysts have said they do not think the ECB will increase interest rates yet.

In 2008, when high oil prices were fuelling inflation just ahead of the bankruptcy of Lehman Brothers, the ECB began cutting interest rates from the level of 4.25%. The interest rates have remained at 1.0% since May 2009.

Earlier, the Bank of England held UK interest rates at a record low 0.5% for the 22nd consecutive month.

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By: Hilde Ovrebekk
+44 20 8652 3214

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