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Trichet's last rates decision: no change

Thursday, October 06, 2011 - 01:57

Oct.06 - The ECB has kept rates unchanged at 1.5 percent at its meeting in Berlin, the last for ECB President Jean-Claude Trichet before he hands over to Mario Draghi, currently Italy's central bank governor. Sonia Legg reports

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It'll be all change at the top of the ECB later this month but for now there's no change to the bank's interest rate. As expected President Jean-Claude Trichet announced the rate would remain at 1.5 percent because of higher than desired inflation and fears about the strength of the euro zone economy. (SOUNDBITE) (English) JEAN-CLAUDE TRICHET, ECB PRESIDENT, SAYING: "Ongoing tensions in financial markets and unfavourable effects on financing conditions are likely to dampen the economic growth in the euro area in the second half of the year." During this final conference he also announced a restart of covered bond buying with a 40 billion euro programme. And said the ECB would help struggling banks by providing lenders with longer-term liquidity to ward off a new credit crunch. (SOUNDBITE) (English) JEAN-CLAUDE TRICHET, ECB PRESIDENT, SAYING: "The situation of the banking sector calls for particular attention, taking into account the interplay between sovereign risk issues and banks' funding needs." He wasn't the only President focusing on bank recapitalisation. The EU Commission's Jose Barroso had a similar message. (SOUNDBITE) (English) EU COMMISSION PRESIDENT JOSE MANUEL BARROSO SAYING: "We are determined to do everything to ensure that Europe's banks are able to play their essential role in lending to citizens and businesses." As both men spoke, talks were starting between France and Belgium over how best to split up the struggling Dexia bank. Belgium has warned France it's not willing to foot the whole bill. But a deal is expected to be put before the board at the weekend. The euro rallied for a third day against the dollar after the rates decision and European shares trimmed earlier gains. Back in Berlin there was a photocall to mark Trichet's last news conference. He'll be replaced by Bank of Italy Governor Mario Draghi next month. There were smiles all round but no-one is underestimating the challenges ahead. Sonia Legg, Reuters.