ECB leaves interest rates unchanged

At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 1.00%, 1.75% and 0.25% respectively.

The European Central Bank will continue to offer special longer-term liquidity tenders in 2011, ECB President Jean-Claude Trichet said.

The extra liquidity measures were due to be phased out early next year, so the new decision should offer some relief to the euro zone's troubled debt markets.

The ECB will now offer three-month refinancing operations at a fixed rate with a full allotment throughout the first quarter of 2011 and at least until April 12, while being adjusted "as appropriate," Trichet said at a press conference.

The euro fell against the dollar and Swiss franc as he addressed reporters. The single currency slid to $1.3061, while key euro-zone government bond yields were broadly stable after his remarks.

Trichet also provided an update on the ECB's forecasts for euro-zone economic conditions. He said the bank expects gross domestic product in the currency bloc to grow around 1.7% in 2012.

Economic growth this year should be between 1.6% and 1.8%, slowing to between 0.7% and 2.1% next year, according to the new ECB staff projections. Inflation is likely to rise to 1.6% this year, 1.8% in 2011 and 1.5% in 2012, according to the midpoints of the projections for those years. The previous forecasts released in September were broadly the same, although inflation is now seen to be a notch faster next year.