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News : EU Economy Last Updated: May 6, 2011 - 9:38 AM

European Central Bank keeps benchmark interest rate unchanged; Bank of England keeps its key rate at 1694-year low
By Finfacts Team
May 5, 2011 - 1:01 PM

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Bank of Finland Head Office, Helsinki
The European Central Bank as expected today kept its benchmark interest rate of 1.25% unchanged at the meeting of the 23-member governing council in Helsinki. In London, in response to evidence of a fragile economy, the Bank of England's Monetary Policy Committee kept the bank's key interest rate at the 1694-year low of 0.5%.

In Helsinki, Jean-Claude Trichet, the ECB president, may signal the near-term course of planned interest movements and if he uses the code "strong vigilance" on inflation, the markets will pencil in another rate hike in June.

At the April meeting, the central bank raised rates for the first time in almost three years.

Annual inflation rose to 2.8% in April, compared with the target rate of "below but close to" 2% and Eurozone producer price inflation was reported this week to have accelerated to 6.7% in March - - the fastest since September 2008.

Banca d'Italia governor, Mario Draghi, the frontrunner to replace Trichet from November, said last month:
“Monetary policy must take into account the emergence of inflationary tensions, pushed by rising food and energy prices.”

Trichet will begin a press conference at 1:30pm Irish time; 2:30 pm in Helsinki:

Webcast from 1:30 pm (recording after 3 pm).

In London, the the Bank of England’s Monetary Policy Committee today voted to maintain the official bank rate at 0.5%. The Committee also voted to maintain the stock of asset purchases/bond buying commonly known as printing money, financed by the issuance of central bank reserves at £200 billion.

The Committee’s latest inflation and output projections will appear in the Inflation Report to be published on Wednesday 11 May. The minutes of the meeting will be published at 9.30am on Wednesday 18 May.

The previous change in rate change was a reduction of 0.5 percentage points to 0.5% on 5 March 2009. The programme of asset purchases financed by the issuance of central bank reserves was initiated on 5 March 2009. The most recent change in the size of that programme was an increase of £25bn to a total of £200bn on 5 November 2009.

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