European Central Bank holds its benchmark rate steady

BERLIN - The European Central Bank yesterday promised continued support for banks in the euro area, saying that steps taken last month to pump cash into the system had prevented a potentially disastrous credit freeze across the financial system.

The comments from the central bank president, Mario Draghi, came after the bank’s decision to keep its benchmark interest rate steady, amid what it called “tentative’’ signs that the pace of an economic downturn in Europe had stabilized.

The ECB decided to leave the interest rate for the eurozone at 1 percent, following two back-to-back cuts of a quarter-point each in the final months of 2011, after Draghi took over as president of the bank Nov. 1.


Earlier, the Bank of England kept its benchmark interest rate at a record low as the crisis in the eurozone exacerbates problems facing the British economy.

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The central bank for Britain left the interest rate at 0.5 percent and also voted to continue with its existing bond purchasing program of $425 billion. Some economists expect the Bank of England to expand the asset-buying program at its next meeting in February to pump more capital into the British economy.

Many analysts also expect the European Central Bank will cut rates again this year, but not until March, when it will reassess its growth forecast.

At a news conference in Frankfurt, Draghi said the bank saw “tentative’’ signs of stability in the eurozone, but underlined that “downside risks and high uncertainty’’ remain.

Yesterday’s central bank meeting was the first for two new members of the six-member executive board, Benoit Coeure, former deputy director general of the French Treasury, and Joerg Asmussen, who served for more than a decade in the German Finance Ministry. Draghi surprised many last week when he named Peter Praet, a board member from Belgium, as the bank’s de facto chief economist, the first non-German to hold the post.


Many analysts welcomed the move as a sign of the bank’s independence and clever step to avoid having to choose between a candidate from Paris or Berlin.