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August 7, 2009

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ECB Keeps Interest Rates At Record Low

The European Central Bank kept interest rates on hold at a record low yesterday as it waits to see the impact of efforts so far to revive the economy and credit flows.

All 75 economists in a Reuters poll last week had expected the ECB to keep the main policy rate at 1 percent for the third month in a row. The refi rate is likely to stay at this level for another year, the poll showed.

"This was not surprising at all," Nomura economist Laurent Bilke said. "They would have had very little room to cut anyway, given that the overnight market rate is around 0.35 percent."

The euro was little changed after the decision. Massive supplies of ECB liquidity have pushed short-term bank-to-bank rates well below the main policy rate, and analysts said the ECB was unlikely to announce any plans to ease back on the throttle with the euro zone economy still shaky.

The ECB has cut interest rates by 325 basis points since October, but they remain the highest among the biggest developed economies.


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