Business

ECB holds eurozone interest rate at 0.75%

  • 4 October 2012
  • From the section Business

The European Central Bank (ECB) has held its benchmark interest rate at the record low of 0.75%.

Last month, the ECB unveiled details of a bond-buying plan aimed at easing the eurozone's debt crisis.

ECB president Mario Draghi said the announcement of the plan had helped ease tensions on the financial markets.

Earlier, the Bank of England held UK rates at 0.5% and decided not to raise the amount of quantitative easing (QE) from the current level of £375bn.

The ECB held its regular policy meeting this month at Brdo Castle, just outside Ljubljana in Slovenia, instead of at its usual venue of the bank's Eurotower headquarters in Frankfurt.

'Remarkable progress'

Mr Draghi said there was no discussion about rates at the meeting as the governing council was unanimous in its decision.

"Today we are ready with our OMT [Outright Monetary Transaction programme]," Mr Draghi told a news conference.

"We have a fully effective backstop mechanism in place, once all the prerequisites are in place as well.

"OMTs... have helped to alleviate such tensions [in financial markets] over the past few weeks, thereby reducing concerns about the materialisation of destructive scenarios."

Under the ECB's OMT bond-buying plan, the central bank would agree to buy a potentially unlimited amount of bonds of debt-stricken eurozone members, such as Spain and Italy, on the condition that these countries made a formal request for bailout funds and stuck to the terms of any deal.

Mr Draghi repeated this condition when asked about Spain.

He added that Spain had made "remarkable progress" in reforming its labour market and banking sector, but said significant challenges remain.

Earlier on Thursday, Spain sold 3.99bn euros (£3.2bn; $5.16bn) of bonds at an auction.

Investors expect Madrid will eventually request a bailout and this helped push its borrowing costs down for two out of the three bonds sold.

The yield on the two-year bond fell to 3.282% from 5.204% at the last auction in July, and the yield on the five-year bond fell to 4.766% from 6.459%.

But the three-year bond yield edged higher, to 3.956% from 3.845% in July.

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