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ECB keeps interest rates on hold amid uncertainty

ECB keeps interest rates on hold amid uncertainty

The European Central Bank left its key interest rate unchanged at 1.5 percent on Thursday as uncertainty grew over the economic outlook, both due to the debt crisis in the 17-country eurozone and weaker global growth.
The Bank of England did the same, leaving its key rate unaltered at a record low 0.5 percent as worries about Britain's slack economic performance outweighed concerns about 4.4 percent inflation.
Many economists think ECB president Jean-Claude Trichet will use his news conference later Thursday to make it clear that the bank now sees less risk of inflation increases and that interest rates will not be heading higher for some time.
Trichet will also face questions about the bank's role in fighting the eurozone's government debt crisis. The bank last week stepped up risky purchases of Italian and Spanish bonds to keep bond market turmoil from dragging down those countries' finances.
But Trichet and incoming bank president Mario Draghi, who replaces him Nov. 1, have warned governments to quickly cut deficits and said the ECB won't prop them up with bond purchases indefinitely.
Economists and investors will also be following Trichet's remarks to see if he confirms the hint he dropped during testimony in the European Parliament last week that the bank may change its stance that inflation risks are to the upside.
Many economists think Trichet will shift to a view that the risk is "balanced," meaning it's equally likely inflation could come in below expectations.
An eased assessment would suggest that the key refinancing rate will stay at 1.5 percent for some time, after increases of a quarter point in April and July based on the earlier assessment. Higher rates are used by central banks to fight inflation but can dampen growth if done at the wrong time.