ECB: The Euro Zone Will Not Resume Growth Before 2010

• ECB maintains key rate at 1%

The European Central Bank (ECB) yesterday decided to maintain the key rate at the record-low 1%, in line with the analysts" predictions. The decision was interpreted as an attempt to further encourage lending and consolidate the economy of the Euro Zone. ECB President Jean Claude Trichet said the interest rates in the region were appropriate and that he did not anticipate a need to modify the cost of borrowing in the months to come. " The information and analyses that have become available since our meeting on 2 July 2009 confirm our view that the current rates remain appropriate," President Trichet said.

According to him the Euro Zone will not resume growth before 2010. "The world economy, including the euro area, is still undergoing a severe downturn, with the prospect of both external and domestic demand remaining very weak over 2009 before gradually recovering in the course of 2010.

According to Barclays Capital, the Euro Zone economy will grow 0.3% in Q3 compared to Q2, pushing Europe out of the worst recession since World War II. However, the recovery process will not be easy, as unemployment is rising and consumer prices are decreasing. According to the International Monetary Fund, the Euro Zone will report the worst performance among the major economies in 2010.

• No stimulus

The ECB will no longer implement macroeconomic stimulus in the near future and is currently evaluating the impact of the recently concluded bond purchase. Analysts are confident that the ECB"s measures have achieved their goals and, as long as economic statistics exceed expectations, the ECB will no longer implement any stimulus.

On a different note, the Bank of England on Friday announced intent to add 50 billion GBP to the asset purchase plan, taking it to 175 billion GBP in a bid to stimulate the economy. The Bank of England also decided to leave the key rate of 0.5% unchanged.