Europe's two key central banks left interest rates on hold at historic lows Thursday amid concerns that the global recovery from recession could be starting to run out of steam, dpa reportad.
While the Frankfurt-based European Central Bank held borrowing costs at 1 per cent for the 14th consecutive month, the Bank of England (BoE) announced in London that it was keeping rates at 0.5 per cent.
British rates have been on hold since March 2009 with the two central banks having attempted to shore up economic confidence in Europe after it was battered by recession and a debt crisis.
Speaking at a press conference following Thursday`s ECB rate-setting council meeting, bank chief Jean-Claude Trichet attempted to allay fears about the eurozone banking system`s state of health and the currency bloc`s economic outlook.
"We are still in a mode of unlimited supply of liquidity (to the financial sector)," said Trichet.
The ECB has launched additional liquidity measures after its one-year 442-billion-euro (554-billion-dollar) loan facility for commercial banks came to a somewhat smooth end last week.
Thursday`s ECB meeting also came ahead of the release later this month of so-called stress tests on the banking system.
Despite a series of questions at his press conference, Trichet declined to provide additional information on the tests.
However, he said that measures might be needed, including strengthening bank balance sheets, to protect some banks from future financial shocks.
"Appropriate action will have to be taken where needed," he said.
The stress tests, which are aimed at measuring the banks` chances of surviving another financial crisis, are been coordinated by the London-based Committee of European Banking Supervisors.
The committee said Wednesday that its findings would cover 91 institutions.
In his comments at Thursday`s press conference, Trichet also said it now appeared that investors had been "far too pessimistic" about Europe`s commitment to launching tough fiscal plans to cut high debt-and-deficit levels.
But a slew of data is now pointing to world economic growth starting to lose momentum, with concerns emerging that signs of a slowdown in the US, Chinese and European economies might trigger a double-dip recession.
However, Trichet said: "We are in a situation where a number of facts and figures are not confirming that we could have stagnation or double dip."
Trichet said the ECB expected the eurozone economy to grow at a moderate and uneven pace in the coming months. Inflationary pressures would remain subdued, he said.
Analysts expect the ECB will wait until at least the final months of next year before delivering a rate rise.
For the time being, slowing inflation is also giving the ECB room to keep rates on hold.
June annual consumer prices in the eurozone edged down more than forecast to 1.4 per cent from 1.6 per cent in May.
This left consumer prices well within the ECB`s annual target of inflation coming in below but close to 2 per cent.
Announcing its rate decision, the BoE also said it was maintaining its asset purchase facility of 200 billion pounds.
This is despite warnings from some members of the BoE`s policy-making monetary policy committee that rising inflation could threaten the weak economic recovery.
Inflation in Britain currently stands at 3.4 per cent, well above the government`s target of 2 per cent. dpa amc at amh dms jbl Author: Andrew McCathie