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Monday 07th of February 2011
February 3, 2011    

ECB holds rates despite higher inflation

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by Kay Murchie

The European Central Bank (ECB) today elected to keep interest rates on hold at the record low of 1% for the 20th consecutive month.

The move came despite inflation exceeding the Bank’s target.

Earlier this week, the European Union’s statistics office Eurostat revealed inflation in the euro zone rose more than expected in January.

Inflation rose 2.4% on an annual basis in January, up from 2.2% the previous month - exceeding the ECB’s target of just below 2%.

The increase was attributed to higher energy, commodity and food prices.

However, many analysts believe the bank will leave rates unchanged in the short-term as inflation is expected to drop back to target later this year.

At a press conference following today’s meeting, ECB president Jean-Claude Trichet said inflation pressures remained contained but the bank will monitor the situation.

In other news today, Eurostat revealed retail sales fell unexpectedly in the euro zone last month.

It represented the second consecutive monthly decline and followed November’s fall of 0.3%.

According to Eurostat, sales fell 0.6% in December on the month, while on an annual basis, sales were down 0.9%.

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