The ECB keeps official rate unchanged

Date: Thursday 09 Feb 2012

The European Central Bank (ECB) has decided to keep its key lending rate unchanged for another month, in line with what most analysts have been expecting.

Following the rate cuts that were carried out in November and December the ECB is taking a "wait and see" approach in order to evaluate the impact of prior stimulus measures, and leaving its benchmark rate at 1.0%.

Following recent rate cuts and massive liquidity injections, the ECB is applying a monetary easing policy in order to fight a Eurozone economic slow-down that has driven several nations back into recession. It is believed that the ECB prevented a credit crunch with December's €489bn long term refinancing operations, with the three-year lending operation constituting a key factor behind the rally in risk assets.

ECB president Mario Draghi is scheduled to hold an important press conference at 1:30pm London time. He will defend his decision and expound on the ECB's economic outlook. The markets will be curious to know what he has to say about Greece and how the ECB plans to divest its Greek bond holdings.

FM

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