ECB keeps eurozone interest rates on hold at 1%

The European Central Bank (ECB) has held eurozone interest rates at a record low of 1% for the 14th month running, as expected.

The bank has kept rates low to try and stimulate the eurozone economy following the global economic downturn.

Many analysts argue rates need to stay low as governments are cutting back on spending, which undermines growth.

Earlier on Thursday, the Bank of England announced that it had kept UK interest rates on hold at 0.5%.

Explaining the ECB's decision to keep rates on hold, president Jean-Claude Trichet said the eurozone's economic recovery continued in the first half of the year, adding "we expect the [area's] economy to grow at a moderate and still uneven pace, in an environment of high uncertainty".

He said that inflationary pressure remained contained, with inflation likely to remain at or below the bank's 2% target rate over the medium term.

The eurozone economy has been in the international spotlight in recent months, with concerns about high government debt levels hitting global stock markets and threatening to derail the economic recovery.

Many governments have now introduced austerity measures, such as spending cuts and tax rises, designed to cut budget deficits.

For this reason, central banks are wary of increasing interest rates, which would also serve to cool economic growth.

In recent weeks, attention has turned to bank debt, with investors eagerly awaiting the results of stress tests designed to see how well equipped banks are to cope with future financial crises.

Mr Trichet said the tests should "build confidence" in markets as investors learnt how exposed banks were to bad debt. Transparency, he said, would be beneficial.

The results of these tests are due to be published on 23 July.

BBC