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No interest in interest change

September 5, 2013

The European Central Bank has lived up to its promise of keeping its financing rates stable for an extended period of time in line with its forward guidance policy. The move was backed by a nascent eurozone recovery.

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Mario Draghi, President of the European Central Bank, ECB DANIEL ROLAND/AFP/Getty Images
Image: Daniel Roland/AFP/Getty Images

The ECB's decision-making council on Thursday left its main financing rate unchanged at a record-low 0.5 percent. The move didn't come as a big surprise as ECB President Mario Draghi announced in July the central bank would keep rates steady for an "extended period."

He told reporters in Frankfurt the ECB's monetary policy would remain "as accommodative for as long as necessary."

The bank also left unchanged its zero percent interest rate on its deposit facility, while it kept the emergency borrowing rate at 1 percent.

Economic pickup in sight

Draghi didn't appear to be concerned too much about the failure to ring down current market rates as first signs of a feeble eurozone recovery emerged in the 17-member bloc.

Strong orders for manufactured goods had helped factory activity to rise at the fastest pace in over two years in August.

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Looking at consumer price developments, the central bank projected eurozone inflation to average 1.5 percent this year and then 1.3 percent in 2014. that is, well below the 2-percent threshold the central bank advises in order to maintain price stability.

The ECB also upgraded its growth forecast for the single-currency bloc, saying the economy would shrink by 0.4 percent this year, but expand by 1 percent in 2014.

hg/kms (Reuters, AFP, dpa)