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ECB leaves interest rates at 4.25% as expected

Latest update : 2008-09-04

The European Central Bank kept its key lending rate steady at 4.25 percent on Thursday as the 15-nation eurozone faced a double-barreled threat of stiff inflation and weakening economic activity.

The European Central Bank kept its benchmark interest rate at 4.25 percent as expected on Thursday, against a backdrop of high inflation and slowing economic growth in the euro zone.


Financial markets' focus now falls on ECB President Jean-Claude Trichet, who will explain the rate decision and announce updated economic projections made by ECB staff at a news conference at 1230 GMT.


All 83 economists polled by Reuters before the meeting expected rates to stay on hold in the absence of any clear signal from the ECB that it was considering a change.


The ECB also kept its deposit rate at 3.25 percent and left its marginal lending rate at 5.25 percent.


Most economists expect the ECB staff to cut their forecasts of economic growth in 2008 and 2009 from the 1.8 percent and 1.5 percent predicted in June, and to raise the 2008 inflation forecast from 3.4 percent.


Opinion is split on whether the staff will raise or lower their forecast of inflation at 2.4 percent in 2009.


Euro zone inflation eased to 3.8 percent in August from the record high of 4.0 percent set in June and July.

Date created : 2008-09-04