Brussels, 02/07/2009 (Agence Europe) - Meeting in Luxembourg on Thursday 2 July 2009, the European Central Bank (ECB) Governing Council decided to keep interest rates in the eurozone on hold. The main refunding rate remains therefore at 1.00% and the marginal lending facility and deposit facility at 1.75% and 0.25% respectively. The ECB's president, Jean-Claude Trichet, told reporters these were the right interest rates. He added, as after previous Governing Council meetings, that the ECB did not necessarily believe the current rates were the lowest possible for the euro.
The fall in annual inflation to below zero in June 2009 in the eurozone (-0.1%) had been expected, explained Trichet after the Governing Council meeting attended by EU Economic and Monetary Affairs Commissioner Joaquín Almunia and the chair of Eurogroup, Jean-Claude Juncker. This fall in prices is a temporary trend due to the fall in commodity prices and will not last long, he added. Inflation rates would, he said, remain temporarily negative over the next few months, and prices would start to rise again in 2009 in line with the ECB's definition of price stability (medium-term inflation of less than, but close to, 2%). The prospects for the economy are much the same as at the start of June 2009 when the ECB published its forecasts, said Trichet, expecting economic activity to remain weak for the rest of the year but contracting less than in the first quarter of 2009. He expected to see gradual recovery and positive quarterly economic growth rates by the summer of 2010.
The ECB president gave details of the recommended economic recovery programme for member states' public deficits, explaining that healthy and sustainable levels of public finances were required to sustain global macroeconomic stability and eurozone governments had to draw up and communicate ambitious budget tightening and realistic recovery programmes under the Stability and Growth Pact. The conclusions document of the latest European Council stressed the need for budgetary consolidation to match the speed of economic recovery (see EUROPE 9925), the Governing Council expressed stronger views, saying the structural adjustment programme should start no later than when economic activity picks up. It added that budget tightening should be intensified in 2011 and these structural reforms should be well above 0.5% GDP a year. In the event of high public deficit/and or public debt levels, the annual structural adjustments should be at least 1% of GDP. (A.B./transl.fl)