ECB holds rate at 0.5 percent, as expected

    The European Central Bank (ECB) held its main interest rates steady, including its benchmark refinancing rate at 0.50 percent, and said its president, Mario Draghi, would comment on the decision by the bank's governing council at a press conference later today.
    Last month the ECB adopted a form of forward guidance, saying it expected to keep rates at their "present or lower levels for an extended period of time."
    The ECB cut its refi rate by 25 basis points in May.
    In July the inflation rate in the 17-nation euro zone remained steady at 1.6 percent from June. The ECB targets inflation of below but close to 2.0 percent.
    The economy in the euro zone continued to shrink in the first quarter but there have recently been signs that it may start to improve in the second half of the year, leading financial markets to expect that the ECB would maintain rates at today's meeting.
    The ECB expects the euro zone Gross Domestic Product to shrink by 0.6 percent this year, less than a 1.5 percent contraction in 2012.
    In the first quarter, GDP contracted by a quarterly 0.3 percent, the sixth consecutive quarterly contraction, with the annual growth rate a negative 1.1 percent, up from a contraction of 0.9 percent in the fourth quarter.

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