Eurozone rates remain unchanged

The European Central Bank has kept
the eurozone interest rate at its record low of 1 per cent for the 10th month
in a row, as expected.

The ECB also signalled it would
scale back the special lending measures introduced during the financial crisis.

ECB president Jean-Claude Trichet
said that economic recovery in the euro area was “on track but will remain
uneven”.

Worries remain about Greece’s
ability to tackle its debt burden despite its announcement of new austerity
plans.

But Mr Trichet dismissed
suggestions that Greece could leave the euro as “an absurd
hypothesis”.

“As president of the ECB I am
making a very positive judgement on the decisions Greece has taken, they are
convincing in our eyes.”

Earlier on Thursday, the Bank of
England kept the UK’s key interest rate on hold at 0.5 per cent, for the 12th
month in a row.

When the credit markets seized up
during the financial crisis, the ECB introduced a range of cheap bank lending
operations to allow banks to have access to money.

Mr Trichet said the central bank
would now begin withdrawing some of the measures put in place. For instance,
the bank fixed the interest rate charged for three-month loans at the benchmark
rate. That will now return to a variable rate from 28 April.

Eurozone interest rates have been
at 1% since May last year.

The ECB estimates that the
eurozone’s economy will expand by between 0.4 per cent and 1.2 per cent in 2010
and between 0.5 per cent and 2.5 per cent in 2011.

Europe’s return to growth is seen
as fragile, with particular concerns about Greece, Spain, Italy, Ireland and
Portugal.

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