The European Central Bank today left interest rate at the historic low of 1.00% as a way to continue supporting economic growth in the euro zone. President of the central bank Jean-Claude Trichet spoke at the press conference showing the latest economic developments.
Trichet revealed that the current interest rate is appropriate for the undergoing phase and there are not near plans of raising interest rate, while the bank will continue loan offering to banks till 2011.
The ECB will give banks three-month loans in October, November and December in addition to seven-day and one- month funds that would be provided at a fixed interest rate until at least January 18.
In addition, the ECB will undertake three fine-tuning operations by the end of the undergoing month, on November 11 and December 23 when the maturity of 6-month and 12-month loans is due, yet he clarified that indexation of three-month loans to the ECB’s benchmark rate is not a signal of intent on interest.
He said economic conditions improved remarkably as seen by the data released in the second quarter, adding that risks to economic outlook are on the downside.
The upbeat second-quarter data caused the bank to raise growth forecast to around 1.6% (range between 1.4% and 1.8%) compared with June's estimates of 1.0%, while in 2011 the rate is expected to reach 1.4% (range between 0.5% to 2.3%) instead of 1.2%.
He said growth is predicted to be moderate with an uneven pace as there continues to be risks. He expects the progress in the second half of the year to moderate.
With regard prices, he mentioned that inflation pressures remain under control over the medium term, yet prices are estimated to increase slightly later in the current year. He added that inflation expectations in the medium to longer term remain firmly anchored.
He also raised inflation forecasts to a range between 1.5% and 1.7% in 2010 and 1.2% to 2.2% range in 2011.
