European central bank keeps rates unchanged

The European Central Bank (ECB) decided on Thursday to leave its benchmark refinancing rate on hold at 3.25 percent, but warned it may raise the rate in December.

The ECB decided to keep the rate unchanged following a meeting of the bank's 18-head rate-setting council in Frankfurt, where the bank is headquartered, according to reports reaching here.

Speaking at a press conference following the meeting, ECB President Jean-Claude Trichet signaled the ECB might raise the rates in December.

"Strong vigilance remains of the essence so as to ensure the medium to long-term inflation expectations in the euro area remain solidly anchored at levels consistent with price stability," he said.

Financial analysts predicted that the bank may raise the benchmark rates to 2.5 percent at the government council's meeting in December.

Trichet also expressed his confidence on the economic development in the euro zone, saying that the bank expected economic activity in the area to remain robust.

"The conditions remain in place for the euro area economy to grow at solid rates around potential, although some volatility in the quarterly growth rates is likely to emerge around the turn of the year," he said.

Trichet said that the bank expects inflation to pick up in the coming months and overshoot the two percent target this year and next year.

"Risks to the outlook for price stability remain clearly on the upside. They continue to include a stronger pass-through of past oil price rises into consumer prices than currently anticipated and additional increases in administered prices and indirect taxes beyond those announced thus far," he said.

The ECB chief urged the euro zone countries to implement their reforms to create "a fully operational Single Market and flexible product and labor markets."

"The successful implementation of reforms aimed at removing rigidities and inefficiencies in euro area countries would raise potential growth and employment prospects," he said.

Source: Xinhua