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ECB leaves euro rates unchanged

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Media captionMario Draghi says the eurozone faces high uncertainty

The European Central Bank (ECB) has left its key interest rate unchanged at its latest monthly meeting.

It has left its main refinancing operations rate at 1.0%.

The decision followed two consecutive months of rate cuts, which were aimed at boosting the currency bloc's growth.

At a news conference, ECB president Mario Draghi said the eurozone economy was still experiencing "high uncertainty and substantial downside risks".

Many analysts are still predicting that there will be further rate cuts later in the year.

"It is worth keeping in mind that the eurozone is possibly heading into recession and the risks of deflation are material, so it wouldn't be a great surprise if we see another rate cut before the end of Q1, particularly with the focus on eurozone growth that is emerging from EU leaders," said Richard Driver from Caxton FX.

"However, Draghi's reference to balanced deflation risks may cause some to review their expectations."

Earlier in the day, the Bank of England kept its interest rates unchanged at 0.5%, where they have been since March 2009.

The ECB's benchmark rate has not dropped below 1.0% since it began setting rates 13 years ago.

At its December meeting, in addition to cutting rates by a quarter of a percentage point, the ECB relaxed its rules about what collateral it would accept to lend money to banks and announced new, cheaper three-year loans, called long-term refinancing operations (LTRO).

The three-year loans were launched on 21 December, and eurozone banks rushed to take out the loans, borrowing 489bn euros ($643bn; £375bn).

"The more time passes since we had the first three-year LTRO, the more we see signs that it has been an effective policy measure," Mr Draghi said at his news conference.

"Since then, we also saw that some unsecured bond markets have reopened. They were completely shut."