ECB leaves rate unchanged at 1% as economy shows signs of recovery

The European Central Bank has kept its refinancing rate untouched at a record low of 1 percent as it wants to wait to observe the impact of efforts made so far to stimulate the economy.

In UK, the Bank of England

extended its quantitative easing program, while left its interest rate at a record low of 0.5 percent.

European Central Bank President Jean-Claude Trichet said that the economy would remain weak during the rest of the year but the contraction rate was slowing down.

However, Howard Archer, an analyst at IHS Global Insight, said, "A sustainable euro-region recovery is still far from guaranteed."

It may be noted here that prices of consumer goods have took a plunge of 0.6 percent in the euro-zone. But much of the fall owed to drop in the fuel prices.

The unemployment rate soared to 9.4 percent in June, which is the highest since 1999.

Stimulus plans have trimmed down 1-year interest rates to 1.35 percent, down from 1.5 percent.

Currently, banks' demand for liquidity has been recorded at €775 billion, down from €900 billion in June. ECB has been lending banks as much cash as they demand.

As per ECB's projections, the euro-zone economy would shrink around 4.6 percent in 2009 and 0.3 percent in the next year. While, inflation rate would soar to 1.0 percent in the next year, up from 0.3 percent in the present year. The ECB is firm to keep inflation rate below 2 percent.

The topnews.us.