* The ECB keeps the interest rate at 1.5%
* The bank will buy covered bonds for an intended amount of EUR 40 billion
Risks for the European Monetary Union have increased, according to the statement of the president of the European Central Bank (BCE), Jean-Claude Trichet, who yesterday chaired the meeting of the Governor Board of the institution for the last time. The eight-year term of Jean-Claude Trichet will expire at the end of this month, when he will be replaced by Italian Mario Draghi.
"Economic outlook remain exposited to extremely high uncertainty, and risks of a drop have increased", Trichet said, after the meeting where the ECB decided to keep the interest rate at 1.5%, as anticipated by analysts.
This year, the ECB raised the policy rate twice - from 1%, to 1.5%.
The ECB official said that a more extensive analysis of all the data concerning the Eurozone economy and of its future forecasts is being considered.
Also, Trichet said that "Inflation remains high in the Eurozone and will probably remain above 2% in the coming months, but will subsequently fall".
Furthermore, the ECB yesterday announced it would extend new emergency loans to banks, in order to support the financial system of the Eurozone, which has been affected by the sovereign debt crisis. The institution will offer unlimited loans to commercial banks with a 12- and 13-year maturity.
In August, the ECB granted loans of 49.75 billion Euros to 114 banks.
The ECB has also decided to launch a new covered bond purchase program of up to 40 billion Euros (53 billion dollars). As part of this program, the ECB will purchase bonds issued by indebted Eurozone countries on the secondary markets.
A.V. (Translated by Cosmin Ghidoveanu)
Inflation in the Eurozone has increased to 3% in September, whereas the ECB target is a maximum o
