The European Central Bank Refuses To Bow To Pressure To Cut Interest Rates

The European Central Bank held its key interest rate steady at 2.0% at its regular monthly policy-setting meeting on June 2, refusing to bow to pressure to cut rates to inject life into the continent's stagnating economy.

An ECB spokesman said the bank was keeping the minimum bid rate for its regular refinancing operations at 2.00%, meaning it has stayed at the same level for exactly two years. It also held its other two key rates -- the deposit rate and the marginal lending rate -- unchanged at 1% and 3 % respectively.

The status quo won the day after a series of disappointing economic indicators caused the ECB to bide its time before raising rates because it feared that doing so would further restrict already weak growth in the eurozone. But the bank also resisted calls from the governments of Germany and Italy and the OECD to cut rates. The ECB fears such a move would cause inflation.

Copyright Agence France-Presse, 2005

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