ECB kept interest rate at 1.5 percent
07 October 2011
The European Central Bank reinstated some crisis-fighting tools in response to intensifying euro zone issues and kept interest rates at 1.5 percent despite some of the bank's policymakers calling for cuts. At Jean-Claude Trichet's last policy meeting as ECB President, he warned the bank saw "intensified" threats to the euro zone economy from the debt crisis and slowing global economic growth. He said it will offer struggling banks two new injections of ultra-cheap 1-year funding and buy another 40 billion euros of 'covered bonds' -- assets backed by mortgage loans or public sector lending and perceived as safe to own. "The economic outlook remains subject to particularly high uncertainty and intensified downside risks," Trichet told a news conference, offering a more gloomy prognosis than last month when he ‘only’ talked of downside risks. That shift in rhetoric may encourage investors to believe a rate cut is not far away. Trichet raised expectations further by saying policymakers had discussed cutting rates this month, but stopped short of suggesting it was a done deal.