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ECB keeps borrowing costs unchanged


ECB keeps borrowing costs unchanged


The euro rose against the dollar after the European Central Bank left it main interest rate unchanged at a record low of one percent.

Economists do not expect any change until late next year. Explaining the decision at a news conference, ECB president Jean-Claude Trichet said the region’s economy will recover at a gradual pace and emergency measures brought in to counter the financial crisis can be phased out in a timely manner. Those measures carry a long-term risk of inflation and the markets are keen to know when the central bankers think the region’s economy will be strong enough to start withdrawing them. On inflation Trichet said: “The outcome of the monetary analysis confirms the assessment of low inflation rate pressure over the medium term as money and credit growth continues to slow down. Against this background we expect price stability to be maintained over the medium term thereby supporting the purchasing power of euro area households.” Trichet’s apparently more optimistic comments about the euro zone’s economic recovery suggest that the central bank is gradually inching closer to starting its exit strategy from the current very expansionary policy. It is probable that the 16 countries using the euro did return to growth in the third quarter. Service and manufacturing industries grew for the third month running in October and business confidence rose to its highest level in over a year.

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