RTTNews - European Central Bank President Jean-Claude Trichet send Thursday that economic activity in the euro are would decline less in the second half of 2009, following the ECB's decision to retain its overnight interest rate.
As expected, the Governing Council kept the interest rate on the main refinancing operations at 1% after cutting the rate by a quarter point in May from 1.25%. The ECB has lowered interest rates by a total of three and a quarter percentage points since early October 2008.
Recent survey information indicates that, following two quarters of very negative growth, economic activity over the remainder of this year is expected to decline at much less negative rates, said Trichet.
He stated that positive quarterly growth rates are expected by mid-2010, considering adverse lagged effects, such as a further deterioration in labor markets, which are likely to materialize over the coming months.
Regarding inflation, Trichet said that policymakers expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households.
The euro has soared of late versus its US counterpart, bolstered by speculation that green shoots on the economic horizon are an indication that the end of the recession is just around the corner. Earlier this week, the euro rose to a 5-month high near $1.43.
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