ECB Leaves Rates Unchanged; Markets Await Word from Trichet
The European Central Bank left interest rates unchanged for a 20th straight month.
Officials at the ECB in Frankfurt left the benchmark lending rate unchanged at 1%, Bloomberg News reported. The move was widely forecast by analyst and economists.
Attention now shifts to a scheduled news conference with ECB President Jean-Claude Trichet, where he is expected to address the issue of Europe's sovereign debt crisis.
Trichet may announce measures such as extending the ECB's provision of unlimited liquidity for banks or increased bond purchases.
"I still don't believe in massive bond buys, possibly that's more wishful thinking by markets," Carsten Brzeski, an economist at ING Groep NV and a former European Commission official told Bloomberg News. "The U-turn would be extreme and it's not the task of the ECB to solve countries' solvency problems."
Investor concerns about the creditworthiness of eurozone nations has spread from Ireland to Spain, Portugal and even Belgium. An EU and IMF rescue package for Ireland failed to convince investors, heaping pressure on Trichet and the ECB.
"The ECB really wants to focus on its core business but it's not being allowed to," Nick Kounis, chief euro-region economist at ABN Amro NV, told Bloomberg News. "The politicians need to get their act together but until they do, the ECB is left trying to carry the show with these sort of facilities, which are no solution to the problem."