European, British central banks leave rates alone

FRANKFURT (AP) - The European Central Bank left its main interest rate unchanged at a record low 1 percent Thursday even as signs emerge the 16-nation euro zone is slowly emerging from recession.

The bank's president, Jean-Claude Trichet, was to discuss the decision at a press conference later.

Markets were waiting for clues on when the bank might trim back some of its lending efforts that have been giving commercial banks more ready cash during the financial crisis.

The Bank of England also left its main rate at 0.5 percent Thursday but increased its program to expand the money supply by another 25 billion pounds ($41 billion) in an effort to get the country out of recession.

The BoE decided to expand its bond purchase program, called quantitative easing, to 200 billion pounds from 175 billion pounds.

The purchases, which are expected to take three months to complete, aim to increase the amount of money in the economy and are financed by the issuance of central bank reserves, creating new money. The idea is to encourage bank lending to businesses so the economy can get moving again.

The Bank of England's move came after last week's surprise news that Britain remained in recession during the third quarter, even as the United States turned to growth. Most economists expect the eurozone to show growth when third quarter figures come out next week.

Nonetheless, the Bank of England said a number of indicators of spending and confidence were up, suggested that "a pickup in economic activity may soon be evident."

Economists had widely predicted that both banks would leave rates steady.

"The November ECB monetary policy meeting should culminate in the widely expected decision of keeping the main refinancing rate at 1 percent," Ideaglobal analysts said in a Thursday research note.

"No changes in terms of the nonstandard monetary policy operations are on the cards."

Nonstandard measures are the ECB's version of quantitative easing.

Meanwhile, Iceland's central bank lowered its official interest rate by a full point to 11 percent as the country tries to get back on its feet after the credit crisis toppled its overweight banking system last year. It had been at 12 percent since June.

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On the Net:

http://www.ecb.int

http://www.bankofengland.co.u