Fabian Demicoli

European Central Bank keeps main interest rate on hold at 0.75%.


Mario Draghi, the president of the
European Central Bank, today said that the eurozone economy was likely to
remain weak for some time, as he welcomed a vote in Greece's parliament that
approved the government's latest austerity measures. Draghi, speaking after a meeting of
the ECB's governing council at which it was decided to leave interest rates
unchanged, said that national governments needed to carry on implementing
deficit-reduction measures and structural reforms.

Draghi said "The growth momentum is
expected to remain weak. The necessary process of balance-sheet adjustment in
the financial and non-financial sectors and an uneven global recovery will
continue to dampen the pace of recovery."

However, he said that there were some
positives and that money flows had improved since the ECB had announced its
Outright Monetary Transactions (OMT) programme – to buy government bonds in
unlimited amounts – in August.

The programme has not yet been activated,
with Mariano Rajoy, the prime minister of Spain, hinting this week that no
imminent request would be forthcoming from his government unless he was
convinced that such measures would reduce his country's borrowing costs.

Draghi said that the vote in Greece's
parliament that narrowly supported the government's latest austerity measures
"represents real progress, especially when you compare it with the situation
just a few months ago".

The governing council decided to keep
the main eurozone interest rates unchanged. The main refinancing rate will stay
at 0.75%.

Draghi said that high energy prices
and increases in indirect taxation such as value-added tax in some eurozone
countries meant that inflation rates were likely to remain above 2% for the
remainder of 2012.

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