The European Central Bank held key rates steady yesterday and downgraded its 2005-2006 growth forecasts for the 12-country euro zone amid signs its economic recovery lost some momentum late last year.
The ECB held the minimum bid rate for its regular refinancing operations steady at 2%, where it has been since June 2003. And the guardian of the euro also held its other two key rates - the deposit rate and the marginal lending rate - unchanged at 1% and 3% respectively.
At the same time, the ECB cut its forecasts for growth for both this year and next. According to the bank's own staff projections, the euro zone economy would grow by 1.6% in 2005, slower than the previous forecast of 1.9% published in December.
Growth would pick up only modestly to 2.1% in 2006, fractionally short of the 2.2% forecast previously.
The reason for the downgrade was 'disappointing' economic data for the latter part of 2004, ECB President Jean-Claude Trichet explained. The euro area economy grew by a meagre 0.2% in the last three months of last year.
However, there was reason to assume that the slowdown would prove only 'a transitory phenomenon,' the Frenchman said.
