ECB Leaves Refi Rate Unchanged At 1.0%

FRANKFURT (Dow Jones)--The European Central Bank left its key interest rate unchanged at 1.00% Thursday, as widely expected.

The ECB didn't immediately give a reason for its decisions, but President Jean-Claude Trichet will comment at a press conference scheduled for 1330 GMT.

All 47 economists polled by Dow Jones Newswires expected the ECB to keep its benchmark rate untouched, but some are expecting the ECB to raise rates in the first half of next year.

Trichet will likely face questions about the ECB's exit strategy from its expansive monetary stance, after some of the 20 other members on the rate-setting council have recently said they are looking at options for withdrawal.

Bundesbank President Axel Weber said at a banking congress in Berlin last week that it would be "definitively too late" to simply wait and see what impact the financial crisis has on the labor market.

Labor market trends are usually a lagging indicator for economic activity and the ECB has discussed options to go against trends since spring, as its policy decisions take time to feed through to the real economy.

The ECB has flooded the bloc's financial system with abundant liquidity since the onset of the financial crisis in mid-2007. The institution scrapped its policy that banks have to bid for a limited amount of central bank funds and widened the range of collateral its accepts.

The ECB also introduced year-long loans that provide financial institutions with unprecedented refinancing assurances.

Weber spoke out in favor of a "gradual" withdrawal from the enhanced credit support measures employed by the ECB and the 16 national central banks since last year.

Scrapping year-long refinancing assurances for financial institutions in the 330 million person euro zone ought to be a first step, Weber said.

However, the full allotment policy in weekly allocations of central bank money ought to be kept at present, Weber added.

Another 12-month refinancing operation is scheduled for December and reporters will likely ask Trichet if the ECB is mulling the introduction of a spread for this specific operation, which is seen as a bellwether for the state of the financial system.

Trichet dodged the same question at the October meeting and economists expect only scant hints on the exit strategy before the ECB's updated projections for economic activity come out in December.

Meanwhile, recentECB data suggested that the deterioration of credit conditions for euro-zone companies and households will soon bottom out.

The pace at which banks tightened loan conditions--which may have seen a turning point in the first quarter--has come "close to a halt" in the third, said the ECB in its October bank lending survey.

"Market-based financing, in particular via the issuance of debt securities, also contributed negatively to the net demand for loans, indicating improved market financing conditions," the ECB said.

This would also suggest that the ECB's program to buy up to EUR60 billion in covered bonds has started to work.

So far, the ECB and the 16 local central banks guarding the euro have settled covered bond purchases for just more than a third of the targeted volume, or EUR20.980 billion.

ECB Web site: www.ecb.int

-By Roman Kessler, Dow Jones Newswires, +4969 2972 5514, roman.kessler@dowjones.com

Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=BaSS0I8sNMINSIhDKSfJYg%3D%3D. You can use this link on the day this article is published and the following day.

(END) Dow Jones Newswires

November 05, 2009 07:46 ET (12:46 GMT)


Copyright 2009 Dow Jones & Company, Inc.

The Dow Jones content is the property of Dow Jones or its licensors, and is protected by copyright and other intellectual property laws. If you are an individual, you agree not to store, copy, reproduce, modify, distribute, transmit, display, perform, publish, transfer, create derivative works from, broadcast or circulate any Dow Jones content to anyone, including but not limited to others in the same company or organization, without the express prior written consent of Dow Jones. If you are an entity, you agree not to permit access to the Dow Jones content by anyone other than an employee of you.

Notwithstanding the foregoing, the Dow Jones content may be copied and sent without charge in the ordinary course of business provided all copyright and other proprietary rights notices, the original source attribution, and the phrase "Used with permission from Dow Jones & Company” are included. Dow Jones content may only be used in this way for a non-commercial purpose, meaning such copying:
(i) is made on either an infrequent or irregular basis to a limited number of individuals;
(ii) is incidental to the purpose of your principal business;
(iii) cannot be used as a substitute for any Dow Jones content or any substantial part of it;
(iv) has no independent commercial value;
(v) is not separately charged for; and
(vi) is not made in connection with commercial information broking, information vending, publishing or credit rating, nor for substantial reproduction through the press or media, nor for transmission via any private or public network, cable or satellite system.

You may not post any Dow Jones content to forums, newsgroups, mail lists, electronic bulletin boards, or other services, without the prior written consent of Dow Jones. To request consent for this and other matters, you may contact Dow Jones at djnewswires@dowjones.com .

The Dow Jones content is not intended for trading purposes. The Dow Jones content is not appropriate for the purposes of making a decision to carry out a transaction or trade. Nor does it provide any form of advice (investment, tax, legal) amounting to investment advice, or make any recommendations regarding particular financial instruments, investments or products. Dow Jones may discontinue or change the Dow Jones content at any time, without notice.

The Dow Jones content includes facts, views, opinions and recommendations of individuals and organizations deemed of interest. Dow Jones does not guarantee or warrant the accuracy, completeness or timeliness of, or otherwise endorse, these views, opinions and recommendations.

DOW JONES IS NOT RESPONSIBLE FOR ANY DELAY IN YOUR RECEIPT OF THE DOW JONES CONTENT RESULTING FROM THE INHERENT LIMITATIONS OF INTERNET TRANSMISSION VIA THE WORLD WIDE WEB. DUE TO THE NUMBER OF SOURCES FROM WHICH THE DOW JONES CONTENT IS OBTAINED, AND THE INHERENT HAZARDS OF ELECTRONIC DISTRIBUTION, THERE MAY BE DELAYS, OMISSIONS OR INACCURACIES IN THE DOW JONES CONTENT. THE DOW JONES CONTENT IS PROVIDED “AS IS”, WITHOUT ANY WARRANTIES. DOW JONES AND ITS AFFILIATES, AGENTS AND LICENSORS CANNOT AND DO NOT WARRANT THE ACCURACY, COMPLETENESS, CURRENTNESS, TIMELINESS, NONINFRINGEMENT, TITLE, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE DOW JONES CONTENT, AND DOW JONES HEREBY DISCLAIMS ANY SUCH EXPRESS OR IMPLIED WARRANTIES. NEITHER DOW JONES NOR ANY OF ITS AFFILIATES, AGENTS OR LICENSORS SHALL BE LIABLE TO YOU OR ANYONE ELSE FOR ANY LOSS OR INJURY, OTHER THAN DEATH OR PERSONAL INJURY RESULTING DIRECTLY FROM USE OF THE DOW JONES CONTENT, CAUSED IN WHOLE OR PART BY ITS NEGLIGENCE OR CONTINGENCIES BEYOND ITS CONTROL IN PROCURING, COMPILING, INTERPRETING, REPORTING OR DELIVERING THE DOW JONES CONTENT. IN NO EVENT WILL DOW JONES, ITS AFFILIATES, AGENTS OR LICENSORS BE LIABLE TO YOU OR ANYONE ELSE FOR ANY DECISION MADE OR ACTION TAKEN BY YOU IN RELIANCE ON SUCH DOW JONES CONTENT. DOW JONES AND ITS AFFILIATES, AGENTS AND LICENSORS SHALL NOT BE LIABLE TO YOU OR ANYONE ELSE FOR ANY DAMAGES (INCLUDING, WITHOUT LIMITATION, CONSEQUENTIAL, SPECIAL, INCIDENTAL, INDIRECT, OR SIMILAR DAMAGES), OTHER THAN DIRECT DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL THE LIABILITY OF DOW JONES, ITS AFFILIATES, AGENTS AND LICENSORS ARISING OUT OF ANY CLAIM RELATED TO THIS AGREEMENT EXCEED THE AGGREGATE AMOUNT PAID BY YOU FOR THE DOW JONES CONTENT IN THE 12 MONTHS IMMEDIATELY PRECEDING THE EVENT GIVING RISE TO SUCH CLAIM. BECAUSE SOME STATES OR JURISDICTIONS DO NOT ALLOW THE EXCLUSION OR LIMITATION OF LIABILITY FOR DAMAGES OR THE EXCLUSION OF CERTAIN TYPES OF WARRANTIES, PARTS OR ALL OF THE ABOVE LIMITATION MAY NOT APPLY TO YOU.

These Terms of Use, your rights and obligations, and all actions contemplated by these Terms of Use will be governed by the laws of England and Wales, and You and Dow Jones agree to submit to the exclusive jurisdiction of the English Courts.
If any provision in these Terms of Use is invalid or unenforceable under applicable law, the remaining provisions will continue in full force and effect, and the invalid or unenforceable provision will be deemed superseded by a valid, enforceable provision that most closely matches the intent of the original provision.