ECB keeps interest rates on hold at 1%

In a move which was widely expected, the European Central Bank (ECB) elected to keep interest rates for the euro zone on hold today at 1%.

The move came shortly after the Bank of England opted to keep interest rates unchanged at 0.5%.

Returning to the euro zone, the ECB’s president, Jean-Claude Trichet, said that he expects the economy to contract by up to 5.1% in 2009 and signalled it would also struggle to grow in 2010.

At a press conference today, Mr Trichet also said the bank’s planned purchase of €60 billion (£52 billion) of company bonds will commence in July.

Similar measures have been implemented in the UK and the US in order to boost their economies.

Last month, Mr Trichet said the bank had decided in principle to buy euro-denominated covered bonds, a less riskier type of corporate debt.

It is hoped the measures will help the economy by returning lending by commercial banks to normal levels.

In related news, it was announced earlier this week that euro zone unemployment hit a 10-year high as the 16-member nation grapples with recession.

The latest figures take the unemployment rate to 9.2% in April, up from 8.9% in March.

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