ECB pumps in more liquidity and keeps interest rate on hold

 
City A.M. Reporter
The European Central Bank will provide further liquidity for the Eurozone banking system after leaving its main interest rate unchanged at 1.5 per cent at the last monetary policy meeting chaired by Jean-Claude Trichet.

Trichet announced a €40bn (£38.4bn) covered bond purchasing programme, two year-long refinancing facilities and a promise to keep shorter unlimited facilities in place until mid-2012.

The ECB's decision not to cut rates came despite a sharp slowdown in the eurozone economy and a warning last month by Trichet of “intensified downside risks” to growth across the 17-country region.

Trichet said inflation was likely to remain above two per cent in the months ahead.

The escalation in the eurozone debt crisis has undermined Eurozone economic confidence but the ECB’s governing council has been concerned by how annual inflation rose to a three-year high of three per cent in September.