Thursday, March 8, 2012

European Central Bank holds rates at 1%

The European Central Bank held interest rates at 1.0 percent for the third month running today, pausing to assess the impact of a dramatic sweep of measures that has unsettled some at the bank.

Attention will now shift to ECB President Mario Draghi's 1330 GMT news conference, at which he will present updated ECB economic forecasts that financial markets will scrutinise for hints about whether a recent 20 percent rise in oil prices is rekindling inflation concerns.

Draghi is likely to put the onus on governments to fight the euro zone crisis after the central bank pumped over 1 trillion euros into the euro zone banking system since December with twin three-year funding operations, known as LTROs.

The ECB also cut rates twice late last year to a record low of 1.0 percent. Today's decision to hold the main refinancing rate at that level was in line with expectations.

The ECB earned widespread praise for averting a euro zone credit crunch with its three-year loans - handing out 489 billion euros in December and 530 billion euros in February - and by loosening the rules for collateral banks can use in exchange for central bank money.