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Thursday, 6 December, 2001, 13:44 GMT
ECB holds rates steady
100 Euro note and the ECB building
Rates are at their lowest level since February 2000
The European Central Bank (ECB) has left its key interest rate unchanged at 3.25% at its last meeting before the introduction of euro notes and coins in January.

The ECB lowered rates by a bigger than expected fifty basis points four weeks ago, pushing them down to their lowest level since February 2000.

But the bank has reduced rates only four times this year unlike the ten cuts made by the US Federal Reserve and the seven by the Bank of England.

The ECB has not cut rates as often as its counterparts because inflation in the eurozone has been exceeding the 2% target.

European Central Bank President Wim Duisenberg said that euro-zone inflation was "firmly on a downward trend" and should fall below the 2% percent next year.

Inflation fell to 2.1% in November from 2.4% in October.

Incentives to cut

More bad news from Germany, Europe's biggest economy, will add to pressure for the ECB to cut in the New Year.

On Wednesday, it reported unemployment had risen for a 10th consecutive month.

Germany's economy shrank in the third quarter, and is expected to meet the classic definition of a recession when it reports fourth quarter data.

November consumer confidence in the 12 member states of the eurozone fell to a four year low while business confidence hit a five and a half year low.

Mr Duisenberg said euro zone growth, which has been weak in the last half of this year, was likely to remain so in the early months of next year as well.

But, the conditions were in place for the euro zone economy to recover "during the course of next year", Mr Duisenberg said.

See also:

05 Dec 01 | Business
UK leaves interest rates on hold
22 Nov 01 | Business
Rich countries on the brink
22 Nov 01 | Business
Germany's economy shrinks
07 Nov 01 | Business
US interest rates cut sharply
08 Nov 01 | Business
ECB takes bold action
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