The European Central Bank held its key interest rates steady again today amid signs that the economic downturn seen earlier this year is finally coming to an end.
At its regular monthly policy-setting, the ECB maintained the minimum bid rate for its regular refinancing operations at 2%, where it has been since June 2003. And it also held its other two key rates - the deposit rate and the marginal lending rate - unchanged at 1% and 3% respectively.
Just 45 minutes earlier, the Bank of England had cut its key interest rate for the first time in more than two years, trimming the repo rate by a quarter of a percentage point to 4.5% amid signs of weakening economic growth in Britain.
But with the stalled economy in continental Europe finally showing tentative signs of recovery, no interest rate moves had been expected on this side of the English Channel.
In Germany, the euro zone's biggest economy, for example, manufacturing orders jumped by an unexpectedly strong 2.5% in June, data showed today, after already rising by 2.8% the previous month. Analysts said that the data were additional proof that the prospects for industrial activity and investment' are improving in Germany.
And if the ECB's expectations prove correct that the economic recovery in the euro zone as a whole could gather momentum later this year, the next move in interest rates could actually be up, even if such a move is still some way off, analysts said. The ECB meeting this week took place by means of a teleconference.
So, unlike the other meetings, it was not followed by a news briefing where ECB chief Jean-Claude Trichet could explain the reasoning behind the latest decision. However, recent comments by top ECB officials have all signalled that the bank sees no need for any shift in interest rates for some time.
The ECB has come under heavy political pressure recently to cut rates, but the recent upturn in confidence indicators now appears to be confirming the ECB's projection for a pick-up in growth in the second half of the year.
The recent softening of the euro against the dollar has helped boost such confidence, while risk factors such as runaway oil prices seem to be having little negative economic impact so far. The guardian of the euro believes that borrowing costs are already at historically levels in the 12 countries that share the euro.
* Foreign and Dutch dignitaries will pay their last respects to Wim Duisenberg, the former head of the European Central Bank, at a memorial service before his burial in Amsterdam on Saturday, the Dutch government said. After the service, Duisenberg will be buried in private by his family in Amsterdam.
Duisenberg - who as president of the ECB from its founding in 1998 until 2003 introduced the euro single currency - died on Sunday at his holiday villa aged 70.
