ECB holds interest rates

No change from the European Central Bank this month after its back-to-back interest rate cuts late last year.

Leaving its key borrowing rate at a record low 1.0 percent, the bank wants to assess the impact of the crisis-fighting steps it has already taken.

ECB president Mario Draghi said the bank’s flood of cheap three-year money is helping the eurozone’s banking system substantially and supporting confidence in the bloc’s economy which is showing some signs of stabilisation.

“The extensive recourse to the first three year refinancing operation indicates that our non-standard policy measures are providing a substantial contribution to improving the funding situation of the banks, thereby supporting financing conditions and confidence,” Draghi told a news conference.

To help fight the euro zone debt crisis, the ECB provided banks with nearly half a trillion euros of three-year money in December, called LTRO, and will make a similar offer in February.

French President Nicolas Sarkozy has urged banks to use the cheap three-year loans to buy sovereign bonds of euro zone strugglers and strong debt auctions in Spain and Italy on Thursday suggested some may be doing that, with analysts saying abundant liquidity helped support demand.

Copyright © 2012 euronews