Europe

ECB Keeps Rate at 1% as Economy Shrinks, Price Risks Grow

The European Central Bank left interest rates unchanged as policy makers balance the threat of inflation in Germany against the need to fight the sovereign debt crisis.

ECB officials meeting in Frankfurt today kept the benchmark rate at a record low of 1 percent, as predicted by all 57 economists in a Bloomberg News survey. President Mario Draghi holds a press conference at a 2:30 p.m.

While nations from Greece to Spain are battling recessions and record unemployment, workers in Germany are winning some of the biggest pay increases in 20 years, widening the gaps between Europe’s largest economy and its euro-area peers. Draghi warned in March of “upside risks” to inflation and started talking about how to withdraw the ECB’s emergency measures, just months after cutting rates and pumping more than 1 trillion euros ($1.3 trillion) of cheap cash into Europe’s banking system to stem the sovereign debt crisis. Full story