Brussels, 08/07/2010 (Agence Europe) - During a meeting on 8 July in Frankfurt, the European Central Bank (ECB) Governing Council decided that the interest rate for the main refinancing operations, as well as the interest rates for the marginal lending facility and deposit facility, would remain unchanged at respectively 1.00%, 1.75% and 0.25%. This decision was largely expected, based on worries regarding the health of the banks and economy in the eurozone. Currently, the low level of inflation and the fragility of the economic recovery support the position of keeping rates the same. Specialists do not expect a change in rates before 2011. Fears about a new recession have returned in force over recent weeks. Global demand is expected to shrink in the next few months and will put a brake on exports, particularly from Germany, Europe's main economic powerhouse.
Commenting on the decision made by the Governing Council, Jean-Claude Trichet, the president of the ECB said: “We continue to expect price developments to remain moderate over the policy-relevant medium-term horizon”. The latest data confirm that the economic recovery in the euro area continued in the first half of 2010. Trichet said: “We expect the euro area economy to grow at a moderate and still uneven pace, in an environment of high uncertainty”. He pointed out that the eurozone's GDP grew by 0.2% in the first quarter of 2010.
Trichet added: “Our monetary analysis confirms that inflationary pressures over the medium term remain contained”. In the next few months, the rate of inflation is expected to display a certain “volatility” (with a tendency for inflation to rise later in the year). In 2011, inflation rates are expected to remain moderate.
Trichet also made the following declarations: - it is important put in place an appropriate framework for eurozone crisis management; - eurozone countries must at least comply with their budget consolidation plans (presented as part of the excessive deficit procedures launched in their regard); - the ECB welcomed the decision of the European Council to publish (with the consent of the banks concerned) the individual “stress tests” (see other article). He also stated that “appropriate action is, if necessary, expected to be taken”. (L.C./transl.fl)