4 Feb 2011

ECB keeps interest rates on hold

6:03 am on 4 February 2011

The European Central Bank has kept interest rates in the eurozone unchanged at a record low of 1%, despite fears of increasing inflation.

ECB president Jean-Claude Trichet said inflation pressures remain contained.

But, he added, that "very close monitoring is warranted".

Mr Trichet said the board's decision not to raise interest rates was unanimous.

Although inflation expectations remain "well anchored", he warned that inflation could temporarily increase further and is likely to stay slightly above 2% most of 2011, before moderating again in 2012.

Rising energy and commodity prices were the immediate cause, but Mr Trichet said rising indirect taxes - such as VAT - and price pressures in production chains could further heighten price rises.