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Saturday 22nd of May 2010
February 4, 2010    

Euro zone interest rates on hold at 1%

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by Kay Murchie

The European Central Bank (ECB) today elected to keep interest rates on hold at the historic low of 1% for the ninth consecutive month, as widely expected.

Interest rates are expected to remain on hold for the long-term as a result of uneven growth and low inflation.

The euro zone as a whole emerged from recession in the third quarter after experiencing positive growth.

Meanwhile yesterday, Eurostat revealed retail sales in the euro zone were unchanged in December from January.

The figures disappointed analysts who had expected a 0.4% rise in which is traditionally the busiest month of the year for retailers.

The latest figures highlight the fragile state of the economy and weak consumer demand.

Furthermore, questions have been raised over the recovery of the euro zone, in particular Greece’s deteriorating fiscal situation.

Greece, which is the euro zone’s weakest economy, has the highest debt of the 16-member bloc. Currently, its public debt stands at €300 billion (£268 billion).

Yesterday, the European Commission met to discuss Greece’s tough austerity measures which will see the economy tackle its spiralling debt.

In a statement today, ECB President Jean-Claude Trichet said it was “absolutely crucial” that the Greek Government stick to its plan to get the budget deficit down from the 12.7% of the country’s GDP in 2009 to below 3% in 2012.

“We expect and we are confident that the Greek government will take all the decisions that will permit them to reach that goal,” Mr Trichet said.

Following the interest rate decision, the euro fell to its lowest point since June.

In related news, the Bank of England’s Monetary Policy Committee (MPC) today elected to keep UK interest rates on hold at the historically low level of 0.5% for the eleventh month in a row.

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