The European Central Bank kept interest rates at historic lows today as the euro zone struggles with lacklustre economic growth against a backdrop of modest inflation.
As expected, the central bank left its benchmark rate unchanged at 2 per cent, where it has been since June 2003.
Low morale among businesses and consumers, high unemployment and stuttering manufacturing activity have cast fresh doubt over the euro zone's lacklustre economic recovery.
EU Economic and Monetary Affairs Commissioner Joaquin Almunia noted the negative economic data as he entered the ECB policy meeting earlier today, saying: "They are not so good."
The worsening outlook has money markets ruling out an ECB rate rise this year, and they are even beginning to consider the prospect of a rate cut. The Euro debt bund future hit an all- time high today after the Federal Reserve acknowledged softness in the US economy and said long-term inflation expectations were under control.
The Fed statement, issued after it raised US rates by a quarter percentage point to 3 per cent, backed the view that the
ECB would hold off on rate tightening given the souring euro zone outlook.