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ECB keeps interest rates on hold ECB cuts inflation and growth forecasts
(35 minutes later)
The European Central Bank (ECB) has kept its main interest rate on hold at 0.05% amid investor concern about the fallout from China's economic slowdown. The European Central Bank has cut its inflation and growth forecasts for 2015 and the next two years.
Attention now turns to ECB chief Mario Draghi's news conference shortly for clues about the bank's next moves and its new inflation and growth forecasts. The bank expects inflation in the eurozone to remain "very low" for some years as threats to economic growth increase.
There has been speculation that the ECB might have to extend its current bond-buying programme. Mario Draghi said it expected inflation to be 0.1% for 2015, rising to 1.5% in 2016 and 1.7% in 2017, dampened by lower energy prices.
The ECB also kept the rate on bank overnight deposits at minus 0.2%. He was speaking after the ECB kept its main interest rate on hold at 0.05%.
That means banks must pay to hold funds at the central bank. The ECB chief also admitted that inflation could turn negative in the coming months.
Mr Draghi said that Europe's economic recovery would continue, "albeit at a somewhat weaker pace than expected", amid concern about the fallout from China's economic slowdown.
The ECB now forecasts eurozone economic growth of 1.4% in 2015, down from 1.5%, and 1.7% in 2016, compared with its previous projection of 1.9%.
The ECB made no change to its bond-buying programme.
It also kept the rate for bank overnight deposits on hold at minus 0.2%, which means banks must pay to hold funds at the central bank.
The ECB also maintained its emergency overnight borrowing rate for banks at 0.3%.The ECB also maintained its emergency overnight borrowing rate for banks at 0.3%.
Earlier on Thursday, a survey indicated that activity among eurozone businesses rose at the fastest pace for more than four years in August.Earlier on Thursday, a survey indicated that activity among eurozone businesses rose at the fastest pace for more than four years in August.
The composite purchasing managers' index (PMI) compiled by Markit rose to 54.3 last month, up from July's figure of 53.9. A figure above 50 indicates expansion.The composite purchasing managers' index (PMI) compiled by Markit rose to 54.3 last month, up from July's figure of 53.9. A figure above 50 indicates expansion.
Markit chief economist Chris Williamson said the PMI results suggested that the eurozone's economy would grow by 0.4% in the third quarter of the year, which he called "a solid - albeit unspectacular - rate of expansion".Markit chief economist Chris Williamson said the PMI results suggested that the eurozone's economy would grow by 0.4% in the third quarter of the year, which he called "a solid - albeit unspectacular - rate of expansion".
Eurostat said on Thursday that eurozone retail sales rose by 0.4% in July compared with June, roughly in line with expectations and considerably better than the 0.2% decline in June.
Consumer confidence appeared to be particularly strong in Germany, Europe's biggest economy, where retail sales jumped by 1.4% last month.