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ECB maintains 1% interest rate, extends emergency bank loans

The European Central Bank remains in crisis mode.

European Central Bank President Jean-Claude Trichet
European Central Bank President Jean-Claude Trichet

THE EUROPEAN CENTRAL Bank has announced it will not change its key lending rate, maintaining a record low of 1%.

The decision marks the 17th month in a row that the ECB has kept interests rates at his level.

At a press conference in Frankfurt today, the ECB President Jean-Claude Trichet announced that the bank will also extend emergency bank loans into 2011, offering eurozone countries unlimited funding at fixed interest rates.

Double dip

However, he denied that this was for fear of a possible double dip recession in the United States.

He said that although US recovery was slow the country is proceeding largely as the ECB had expected, explaining; “We didn’t expect extraordinarily dynamic growth”.

In relation to Europe, he more optimistic: “Recent economic data for the euro area have been stronger than expected… Looking ahead, the recovery should proceed at a moderate pace, with uncertainty still prevailing”, he said.

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Ireland

When asked about Ireland, Tichet said that the country needed to “take appropriate decisions” – as it had at the beginning of the recession. He added that the banks were the responsibility of the Irish government, and expressed confidence that the government would make the right decisions.

The ECB raised its inflation forecasts for 2010 and 2011 by 0.1 percentage point to about 1.6% and 1.7%, respectively.

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