As expected, the European Central Bank has kept interest rates on hold at 4.25%, against a background of weak euro zone economic data and a fresh record high for inflation. ECB President Jean-Claude Trichet and the bank’s Governing Council remain concerned about inflation but for the moment are keeping their options open.
Trichet explained the decision by saying: “This will preserve purchasing power in the medium term and support sustainable growth and employment. On the basis of our assessment, the current monetary policy stance will contribute to achieving our objective. We will continue to monitor very closely all developments over the period ahead.” The phrase “monitor very closely all developments” was seen by economists as an indication of no rate increase this year.