ECB holds rates, to give new economic outlook

Thu Dec 6, 2012 8:20am EST
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By Sakari Suoninen

FRANKFURT (Reuters) - The European Central Bank held interest rates at a record low of 0.75 percent on Thursday, leaving investors to shift their attention to new economic forecasts for clues about possible cuts next year.

ECB President Mario Draghi is expected to present a downward revision of the bank's staff projections at his news conference, due to start at 8:30 a.m. EDT. The projections will also include the first forecasts for 2014.

The Governing Council's decision to leave its main interest rate unchanged matched economists' expectations in a Reuters poll, which also showed opinion was split down the middle over the chances of a cut early next year.

The euro held steady after the decision was announced.

The ECB's economic assessment will be analyzed carefully, not only to sketch out a future interest rate path but also for other measures that could help revive the debt-stricken south of the euro zone.

"It will be interesting and important to look at how they see the risks of the economic outlook," said Nick Matthews, economist at Nomura.

"Our baseline is that they keep them to the downside, but any change to that stance -- so if they move to something more balanced or even 'slightly tilted to the downside' -- would signal increased confidence from the ECB," said Matthews, who expects a rate cut in March next year.

While financial markets have calmed since the EU and the International Monetary Fund put in place further steps to help Greece, and the ECB promised to do what it takes to preserve the euro, the bloc's economy has sunk into recession from which it shows few signs of emerging soon.   Continued...

The Euro currency sign is seen next to the European Central Bank (ECB) headquarters in Frankfurt November 6, 2012. REUTERS/Lisi Niesner