ECB Leaves Key Interest Rate Unchanged At Record Low For Second Month

In its Governing Council meeting held in Luxembourg, the ECB kept its key interest rate, which is the rate on main refinancing operations at 1%, where it has been from May. The bank also held its interest rate on marginal lending facility unchanged at 1.75% and the rate on deposit facility at 0.25%.
ECB President Jean-Claude Trichet, who said in June that the economy is still in “uncharted waters”, is expected to reveal further details of the EUR 60 billion bond purchase plan announced in May in his regular post-decision press conference at 8.30am ET. The ECB is expected to start buying EUR 60 billion of covered bonds this month to boost lending.
To ease strains in the banking sector, the ECB on June 24 injected EUR 442 billion into the financial system, the biggest amount it has ever given in a single auction. The decision was the latest in ECB’s efforts to maintain proper functioning of the financial market amid the global economic crisis. The previous record-high allotment was in December 2007, when the bank pumped in EUR 348.6 billion.

Eurozone Retail Sales Fall More Than Expected In May

Retail sales fell 0.4% month-on-moth in May following a revised increase of 0.1% in April, data released by the Eurostat showed Friday. Meanwhile, economists had expected a drop of just 0.1%.
Compared to the previous year, sales fell 3.3% in May following a revised 2.5% decline in April and exceeding the expected fall of 2.7%.
Retail sales data, which came a day after the European Central Bank held its key interest rate at a record low of 1% for the second straight month, indicate that demand remain sluggish in the 16-nation economy despite various stimulus measures. In addition, the latest report also showed that the slight increase seen in April was just a slip from the downtrend.
Sales of food, drinks and tobacco rose 0.2% month-on-month and that in the non-food sector decreased 0.6%. Excluding automotive fuel, total retail trade decreased 0.4%.