The European Central Bank kept its key lending rate unchanged in August at 1.0% as had been widely expected. The ECB said in its press release that “current rates remain appropriate,” signaling no further rate reductions are likely needed.
The central bank added that economic activity over the remainder of this year is expected to remain weak. But there are growing signs that the global recession is bottoming out.
Recent surveys of the eurozone suggest that the pace of contraction is clearly slowing down, and after a period of stability, a gradual recovery is forecast to begin next year.
Nonetheless, worries about the banking system remain, and the ECB once again called for banks to strengthen their capital.
In the meantime, the Bank of England held its main interest rate at 0.5% as forecast by nearly all analysts. The BoE voted to continue with its program of asset purchases financed by the issuance of central bank reserves and to increase its size by £50 billion to £175 billion.
There have been increasing signs that output in the UK’s main export markets is stabilizing, the BoE said. The pace of contraction has moderated, but the central bank added that the “recession (in the UK)appears to have been deeper than previously thought.”
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