ECB holds rates at 2% despite easing hints

The European Central Bank kept interest rates unchanged at 2 per cent today, suggesting that mixed economic data leaves it unready…

The European Central Bank kept interest rates unchanged at 2 per cent today, suggesting that mixed economic data leaves it unready to back up hints of credit easing with action.

The decision disappointed some people on financial markets who expected a cut after ECB President Jean-Claude Trichet said the central bank would review its policy if consumer prospects fail to recover.

But an upbeat reading of manufacturing in the euro zone and improving French consumer confidence released today threw some cold water on rate cut speculation.

Mr Trichet holds a news conference at 1:30 p.m. to explain the decision.

Critical to financial markets will be whether Mr Trichet says the central bank sees risks tilted toward the downside, code for a bias towards monetary easing if the recovery shows further signs of faltering.

Financial markets have priced in a cut by June. While a majority of economists surveyed by Reuters this week said ECB interest rates had already hit their floor for this cycle, they too see chances mounting of a further cut.

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