The European Central Bank has kept interest rates on hold for the 15th month running today with the focus of attention its view on an economic recovery that remains in a delicate phase.
Fourteen months ago, the bank cut its key official interest rate by a quarter of a percentage point to a record low of 1 per cent.
Today, the governing council of the ECB kept interest rates on the marginal lending facility and the deposit facility unchanged at 1.00 per cent, 1.75 per cent and 0.25 per cent respectively.
The ECB's 22 policymakers started their meeting on schedule at 7am. Its post-rate decision news conference will be studied for signs of whether the ECB sees the euro-zone economy maintaining recent signs of improvement.
"Trichet should be in a sunny mood. The data have continued to improve and the euro zone's sovereign debt troubles have moved out of the spotlight," said Societe Generale economist Klaus Baader.
"The stress tests, which the ECB had a major hand in, can also be seen as quite a success. Bank stocks have been rising, and the increased level of transparency has certainly been welcomed."
Mr Trichet will also be pushed for an early hint on whether banks will continue to have access to unlimited ECB cash for the rest of the year, past the current deadline of October.
The decision is more likely to be held back until next month but prolonging full allotment, especially for longer-term three-month lending operations, would reassert downward pressure on money market rates, which have been rising since the end of March.
Analysts say better-than-expected stress tests results have already sparked improvement on bank-to-bank lending markets, with higher turnover in short-dated loans, in a hopeful sign that banks can cope with less ECB funding.
The rise in interbank rates has been supported by banks scaling back their intake of ECB loans and on market expectations the central bank will continue phasing out its support measures.
Citi economist Juergen Michels said Mr Trichet would maintain the relaxed stance he took last month on the steady upwards march in interbank rates.
Mr Trichet "is likely to describe the increase in rates as a consequence of the will of banks to tap less of the still unlimited funds available," he said.
In sharp contrast to US indicators, which suggest the post-recession recovery may be flagging, data in the 16-nation euro zone has continued to outperform since the ECB's July meeting. That divergence has opened a gulf between the ECB and the US Federal Reserve, which has publicly toyed with a return to stronger stimulus along with the Bank of England, also expected to hold fire at its meeting today.
Reuters