ECB keeps interest rate intact

April 4, 2012 at 11:56 AM

FRANKFURT, Germany, April 4 (UPI) -- The European Central Bank left its overnight, bank-to-bank lending rates at 1 percent, the bank said in a statement.

The decision was widely expected, given the ECB has propped up the European economy in recent months with three-year loans given to about 800 banks at the 1 percent rate.

In remarks prepared for an afternoon news conference in Frankfurt, Germany, ECB President Mario Draghi said inflation would likely remain stable, while the economy was expected to grow "at low levels in the early months of 2012, (with) a moderate recovery in activity ... in the course of the year."

He also said, "downside risks to the economic outlook prevail."

Inflation in Europe hit an annual rate of 2.6 percent in March, higher than the central bank's target of just under 2 percent. Inflation is likely to remain above the target through 2012, he said "owing to recent increases in energy prices as well as recently announced rises in indirect taxes."

Draghi said the financial sector has strengthened, although the demand for credit "remains weak." Nevertheless, he urged banks to "strengthen their resilience further, including by retaining earnings."

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