The European Central Bank has left its main interest rate unchanged at 1 per cent for the 12th consecutive month as it prepares a response to the escalating crisis over eurozone public finances. The decision was widely expected by analysts. Eurozone inflation, at 1.5 per cent in April, continues to undershoot the ECB’s target of an annual rate “below but close” to 2 per cent, and is expected to remain moderate.
Jean-Claude Trichet, president, is facing pressure from financial markets to consider unprecedented emergency action when it comes to shoring up confidence in Europe’s 11 year-old monetary union. If the ECB decided further confidence-boosting measures were needed, one option touted by analysts would be to resume unlimited offers of one-year loans to eurozone banks. Some have even suggested the ECB could overcome its previous objections and purchase eurozone government bonds outright – following the “quantitative easing” programmes of other central banks. More on ft.com.
