ECB Maintains Policy Settings, Holds Rate at 1.00%

The European Central Bank (ECB) held its Main refinancing operations rate unchanged at 1.00%.  ECB governor, Mario Draghi, said: "Looking ahead, we are firmly committed to maintaining price stability in the euro area, in line with our mandate. To this end, the continued firm anchoring of inflation expectations – in line with our aim of maintaining inflation rates below, but close to, 2% over the medium term – is of the essence."

Previously the ECB cut the interest rate by 25 basis points at its November and December meetings.  The ECB last increased the interest rates by 25 basis points at its July meeting; pausing in May and June, after raising the rate by 25 basis points to 1.25% in April last year.  The Euro Area reported annual HICP inflation of 2.7% in January, 3% in November and October and September, 2.5% in August and July, 2.7% in June (same as May) and above the Bank's inflation target of maintaining inflation below, but close to, 2% over the medium term. 

The Euro Area reported quarterly GDP growth in the September quarter of 0.2% (1.4% y/y); the same as the June quarter of 0.2%, following a 0.8% increase in the March quarter, and a 0.3% increase in the December quarter of 2010.  The Euro (EUR) has weakened by about 5% against the US dollar over the past year, while the EURUSD exchange rate last traded around 1.33

The ECB recently completed its second round of LTRO funding for European banks; allotting EUR 529.5 billion to 800 banks.

www.CentralBankNews.info