ECB leaves interest rates at 4.25 pct as expected

Thu, Oct 2 2008, 12:02 GMT
http://www.afxnews.com

FRANKFURT, Oct 2 (Reuters) - The European Central Bank left its benchmark interest rate at 4.25 percent on Thursday, and markets are now awaiting President Jean-Claude Trichet's take on whether global financial havoc has affected the rate outlook.

All 81 analysts polled by Reuters last week had expected the ECB to keep rates at a 7-year high for the third month in a row, due to its concerns about above target inflation.

But there is growing evidence that the region's economy is suffering after more than a year of financial market turmoil, which has deepened dramatically in recent weeks.

Euro zone unemployment is rising unexpectedly and manufacturing activity is at its weakest since just after the Sept. 11, 2001 attacks on the United States.

Most analysts expect the problems to pave the way for a rate cut early next year.

Inflation fell to 3.6 percent year-on-year in September, although it remains well above the ECB's 2 percent threshold. Trichet will explain the reasons for the decision at a news conference at 1230 GMT.

(Reporting by Krista Hughes; editing by David Stamp) Keywords: ECB/RATE

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