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European Central Bank Holds Key Rate Steady

August 01, 2003|From Bloomberg News

The European Central Bank on Thursday left its benchmark interest rate at a half-century low of 2% amid signs that the economy in the dozen euro nations may be recovering.

The $7.9-trillion euro zone economy should rebound after "subdued" growth in the first half, the ECB has said.

The bank probably will keep rates at current levels until "evidence of the recovery is firm, by mid-2004," the Organization for Economic Cooperation and Development said Thursday.

That echoes expectations that the U.S. Federal Reserve will keep its benchmark short-term rate at the current 1% at least into the first part of 2004.

There have been more signs of improvement in European economic data. Consumer confidence in Germany has risen for five straight months. French manufacturers recently turned more optimistic for the first time in a year, according to a survey.

European stocks have surged since March. Germany's DAX index rose 58.83 points, or 1.7%, to 3,487.86 on Thursday, a 10-month high. European bond yields also have risen recently, suggesting that bond investors sense a turn in the economy.

But France said Thursday that its unemployment rate rose to a three-year high of 9.5% in June from 9.3% in May.

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