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Eurozone interest rates held at 0.75% European Central Bank cuts growth forecasts and holds rates
(about 1 hour later)
The European Central Bank (ECB) has held the benchmark eurozone interest rate at the record low of 0.75%, as had been expected. The European Central Bank (ECB) has revised down its eurozone growth forecasts for this year and next as "economic weakness extends into 2013".
The rate has been at this level for five months, after July's cut from 1%. ECB President Mario Draghi said the bank expected the bloc's economy to shrink by about 0.5% this year, before recovering later in 2013.
ECB President Mario Draghi will give a press conference later, outlining the bank's views on the economic outlook for the eurozone. He said weak consumer and investor sentiment was weighing on growth.
Earlier on Thursday, the Bank of England also kept its main interest rate unchanged, leaving it at 0.5%. Earlier, the ECB held the benchmark eurozone interest rate at the record low of 0.75%, as had been expected.
Mr Draghi said rates had been left unchanged due to higher energy prices, rising taxes and the fact inflation fell from 2.5% to 2.2% last month.
Interest rates are the main tool used by central banks to influence demand and therefore prices in the economy.
Mr Draghi said the bank expected inflation to fall below 2% next year. The target rate is below but close to 2%.
Interest rates have been at 0.75% for five months, after July's cut from 1%. The Bank of England also kept its main interest rate unchanged on Thursday, leaving it at 0.5%.
'Improvement'
The ECB revised down is forecast for the eurozone economic growth in 2013 to between minus 0.9% and plus 0.4%.
For 2014, it forecast growth of between 0.2% and 2.2%.
Mr Draghi said "persistent uncertainty" was weighing on economic activity, but added that a "strengthening global demand and a significant improvement in financial market confidence" would help fuel a recovery later in 2013.
The eurozone is back in recession as austerity measures designed to reduce debt levels continue to undermine demand and confidence.The eurozone is back in recession as austerity measures designed to reduce debt levels continue to undermine demand and confidence.
The economy of the 17-member bloc contracted by 0.1% between July and September, after shrinking 0.2% in the previous three months.The economy of the 17-member bloc contracted by 0.1% between July and September, after shrinking 0.2% in the previous three months.
Meanwhile, the unemployment rate is at a record high of 11.7%.Meanwhile, the unemployment rate is at a record high of 11.7%.
But inflation fell last month, from 2.5% to 2.2%, so there is little pressure on the ECB to raise interest rates.
The eurozone was last in recession in 2009, when the economy contracted for five consecutive quarters.The eurozone was last in recession in 2009, when the economy contracted for five consecutive quarters.