Europese Centrale Bank houdt vast aan 2 procent rente (en)
The European Central Bank left interest rates for the euro area unchanged at 2 per cent on Thursday (5 February).
The move was broadly in line with comments made by its president Jean-Claude Trichet i at last month's meeting, although a number of analysts had raised the possibility of further cut this month.
Speaking at a press conference in Frankfurt, Mr Trichet signalled an interest rate cut is highly likely in March however.
"I will repeat our position that 2 per cent is not the lowest level, but that 0 per cent is not something we would consider appropriate at the current time," said Mr Trichet responding to speculation on future cuts.
The two-day meeting of the bank's governing council was attended by economy commissioner, Joaquin Almunia.
Mr Trichet said there were some small positive signs regarding the European economy but that the current environment remained very unstable as the world went through a disorderly correction. "Overall the level of uncertainty remains exceptionally high."
He pointed to the contrasting potential risks of rising inflation later in the year caused by low commodity prices and the subsequent boost in consumption versus further economic slowdown.
New data since the bank's last meeting on January 15 reinforced the governing council's belief that inflation would continue to decline until mid 2009 and then start to rise in the second half of the year.
Mr Trichet also said that the current stimulus measures being taken by a number of European governments must be temporary in nature to maintain stability.
"To support public confidence it is crucial that governments return to responsible fiscal policies as soon as possible," he said.
The ECB president signalled that seven eurozone states would probably exceed the Stability and Growth Pact rule allowing for a budget deficit of no more than 3 per cent of GDP – an issue likely to be discussed by euro zone ministers meeting next Monday.
Asked whether the ECB would consider creating a eurozone bond to help a number of peripheral countries currently suffering from rating agency downgrades and high bond yields, Mr Trichet said this was an issue for national governments.