THE EUROPEAN Central Bank decided to hold its key interest rate at 1.5 per cent at today’s scheduled meeting in Frankfurt, but will monitor inflation ”very closely”, according to its chief.

ECB President Jean-Claude Trichet also said that the bank’s bond-buying programme has not been shelved. However, Trichet would not say if the bank was propping up bonds issued by the Spanish and Italian governments.

Instead, he said that any bond buying activity by the ECB would be made known at one of the regularly weekly announcements made on Mondays.

Borrowings costs for each hit 14-month highs amid growing concern over the strength of their economies, before easing today.

Interest rate strategist with Citi Steve Mansell told Reuters he thinks it unlikely the ECB is “waiting in the wings to calm the market”. He said the bank would be reluctant to take part in “any kind of market turbulence that’s a direct result of sovereigns not stepping up and doing the required amount in terms of fiscal adjustment”.

Addressing his parliament yesterday, Silvio Berlusconi sought to assure Italians that their national economy is in good shape, saying that the €70 billion austerity package passed last month will balance the country’s budget by 2014.

- Additional reporting by the AP

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