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ECB keeps main interest rate at 1.0 pct as expected

Published 06/04/2009, 07:46 AM
Updated 06/04/2009, 07:48 AM
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FRANKFURT, June 4 (Reuters) - The European Central Bank left its benchmark interest rate unchanged at a record low of 1.0 percent on Thursday, as expected.

Markets are now awaiting President Jean-Claude Trichet's news conference at 1230 GMT, when he will explain the decision and give specifics on the bank's plans to buy up around 60 billion euros' ($85 billion) worth of covered bonds.

The ECB also kept its overnight deposit rate, which is acting as a floor for money markets, at 0.25 percent, and left its marginal lending rate at 1.75 percent.

Seventy-six of 78 economists in a Reuters poll had expected the ECB to leave rates on hold. Two said it would cut them.

"This was no surprise," said Natixis economist Sylvain Broyer. "I understand that they want to hold ammunition in rates, but I hope to see further moves towards more dovish statements."

Euro zone inflation is low and the economy is shrinking fast, although some data have shown signs of improvement.

Markets are also keen to see whether Trichet gives any signals that the ECB plans to keep rates low for a lengthy period, or alternatively, whether they could be reduced further.

Another focus will be on whether he hints that the ECB is considering other types of assets for potential purchase apart from covered bonds. (Reporting by Sakari Suoninen; Editing by David Stamp)

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