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News : EU Economy Last Updated: Aug 5, 2011 - 10:33 AM

European Central Bank keeps its benchmark interest rate at 1.5%; Bank of England rate of 0.5% remains at 1694-year low
By Finfacts Team
Aug 4, 2011 - 1:32 PM

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Jean-Claude Trichet, president of the European Central Bank, at a press conference at the end of an emergency Eurozone summit, Brussels, July 21, 2011.

The European Central Bank kept its benchmark interest rate at 1.5% today as economic growth slows in the Eurozone and bond investors lay siege to Italy and Spain. Also on Thursday, the Bank of England kept its key interest rate at a 1694-year low of 0.5%.  

In Frankfurt, the 23-strong governing council of the ECB left the benchmark rate unchanged after a rise of 25 basis points last month. Meanwhile, yields/ market interest rates on Italian and Spanish sovereign bonds remain near record highs since the euro was launched in 1999.

The combination of slowing growth and a resumption of the debt crisis at an elevated level, is expected to keep rates stables in coming month. 

Jean-Claude Trichet, ECB president, will hold a press conference at 2:30 pm in Frankfurt and 1:30 pm in Dublin and his reaction to the market reactions to Italy and Spain will be keenly watched.

Webcast of press conference (recording available after 3 pm Irish time.

In London, the Bank of England’s Monetary Policy Committee today voted to maintain the bank's official interest rate at 0.5% - - the lowest since the bank was founded in 1694. The Committee also voted to maintain the stock of asset purchases (of bonds in the market to increase the money supply) financed by the issuance of central bank reserves at £200bn.

The Committee’s latest inflation and output projections will appear in the Inflation Report to be published at 10.30 am on Wednesday August 10.

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

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