ECB holds key interest rate at 0.5% following April cut

06 June 2013 12:45  [Source: ICIS news]

LONDON (ICIS)--The European Central Bank (ECB) held its key interest rate at 0.50% on Thursday, as Europe’s economy starts to show some signs of recovery.

Last month the ECB cut its rate by 0.25 percentage points – the first movement in 10 months.

GDP data for the first quarter shows that the contraction of the European economy has slowed, declining by 0.1% in the EU and 0.2% in the eurozone.

In the fourth quarter of 2012, GDP growth rates were -0.5% in the EU and -0.6% in the eurozone, according to European statistics agency Eurostat.

The latest data from Markit showed that May was the second consecutive month of slowing rates of decline for the eurozone economy. Its Eurozone PMI (purchasing managers’ index) Composite Output Index was 47.7, compared to 46.9 in April. Combining manufacturing and service data, a PMI of above 50 is necessary to indicate economic expansion.

The Organisation for Economic Co-operation and Development (OECD), however, predicted a relatively gloomy full-year outlook for the eurozone, with GDP contracting by 0.6% this year and expanding by 1.1% in 2014, as growth remains constrained by the lingering effects of the economic crisis.

The OECD forecast in its latest Economic Outlook report painted a bleaker picture than its previous one in November last year, which predicted that eurozone GDP would shrink by 0.1% in 2013 and grow by 1.3% in 2014.

Earlier on Thursday, the Bank of England held its key interest rate at 0.5% and maintained quantitative easing (QE) levels at £375bn (€441bn, $577bn).

(€1 = £0.85, $1 = £0.65, $1 = €0.76)


By: Graeme Paterson
+44 20 8652 3214



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