Amid growing concerns about the economy, the European Central Bank maintained the interest rates at their record low today. The benchmark lending rate was set at 1 percent for the18th consecutive month as the borrowing costs have surged across the region and the bank is facing challenges to boost the faltering economy.
The move is considered a follow-up to easing measures done by banks all over the world on fears that the current economic situation can seriously undermine the future economic recovery. The bank has not put brakes on its lending as the new policy suggests that it is the best way of avoiding meltdowns.
Europe is facing a poor economic recovery as Irish 10-year bond yields saw a major boost versus German bunds on Sept. 29 and the country's economic situation remains precarious. The bailouts given to the Anglo Irish Bank Corp. and Allied Irish Banks Plc are expected to strain government finances and create troubles for the economy. The Portuguese-German 10-year yield spread also saw a boost of 88 basis points today, down from its record high on Sept. 28 but still higher than the March 10 rates.
The ECB started tackling the financial crisis by adopting a core policy of excessive cash lending to member banks at its benchmark rate for a period of up to 12 months. The policy has come under fire by economic experts who think that too much lending will stop economic growth and appreciate the euro, which is already on the surge.
