Euro zone rates secured at 1% - analysts
Tuesday, 6 October 2009 14:26The euro zone's key interest rate is locked in at a record low of 1% until its economy pulls firmly out of recession, which could take longer than expected, analysts say.
European Central Bank policymakers meet on Thursday in Venice for one of two meetings held annually away from the bank's headquarters in Frankfurt.
Analysts said that the bank will leave the main rate steady, and with the risk of deflation lingering they predict that official interest rates will be kept on hold for much longer than markets anticipate.
Prices across the euro zone fell in September for the fourth month in a row, by 0.3% according to an estimate by the EU Eurostat data agency.
However, economists do not expect the bloc to be gripped by deflation, a long run of falling prices that can set in motion a vicious spiral of falling demand, falling output, wages and employment, and a further decline in demand.
Even though some economies, including Germany and France, have begun to rebound from their worst recession since the Great Depression, economic activity will be modest and uncertain for a while and the risk of a another dip cannot be ruled out.
In London, the Bank of England is also expected to maintain its key rate at a record low of 0.5% on Thursday as Britain also looks to return to growth before the end of the year.
