European Central Bank left its benchmark interest rate unchanged at 1 percent
The European Central Bank left its benchmark interest rate unchanged at 1 percent for the ninth month running Thursday while the Bank of England called a halt to its policy of pumping money into the British economy.
In a statement, the European Central Bank’s president Jean-Claude Trichet said that price developments in the 16 countries that use the euro remain “subdued” and that inflation expectations were “firmly anchored” around the Bank’s target of “close to, but below 2 percent.”
Trichet also said the eurozone economy — which includes 330 million citizens — continued to expand at the start of the year but warned that the recovery would be “uneven” and “moderate” and that the outlook was subject to “uncertainties.”
Trichet also said it was “absolutely crucial” that the Greek government gets a grip on its public finances as he gave his cautious support to its plan to get the budget deficit down from around 12.7 percent of Greek gross domestic product in 2009 to below 3 percent in 2012.
“We expect and are confident that the Greek government will take all the decisions to meet that goal,” Trichet said.
Trichet also said it was the responsibility of every member government to get their borrowing levels under control as escalating debt levels are adding a burden onto monetary policy.
The Greek debt woes have undermined the euro currency over the last month or two, and raised speculation that EU members might have to fund a bailout, although Greek and EU officials say that won’t be needed.
On Wednesday, the European Commission gave its cautious backing to the Greek government’s plan to slash the budget.
The clear worry for Trichet and his fellow rate-setters is that problems on the periphery of the eurozone and the financial burden of a bailout from the core countries like Germany and France could derail the recovery from recession.
Earlier, the Bank of England kept its main interest rate unchanged at the record low of 0.5 percent and said it would not ask the government for the authority to pump more newly created money into the barely recovering British economy.
The British central bank’s rate-setting Monetary Policy Committee voted to keep its asset purchase program unchanged at 200 billion pounds ($317 billion) but that it will continue to monitor the scale of the program and could ask the government to make further purchases.