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Finance

ECB financing rate on hold despite business pressures

The European Central Bank has said it's keeping its benchmark financing rate on hold at a record-low 0.75 percent. The ECB has refused to enact any changes despite pressures created by the rise of the euro.

Hope that the worst might be over for the eurozone prompted the European Central Bank (ECB) on Tuesday to decide against a lowering of its key interest rate already standing at a record-low 0.75 percent.

ECB President Mario Draghi told a news conference in Frankfurt that current uncertainties would likely be gone by mid-2013.

"The economic weakness in the euro area is expected to prevail in the early part of this year," Draghi commented. "But later in 2013, economic activity should gradually recover, supported by our accommodative monetary policy stance and the improvement in financial market confidence."

Strong euro a flash in the pan?

Draghi left open whether or when the ECB might react to the euro's recent appreciation that analysts fear could put at risk eurozone exports and with it the bloc's economic recovery from its protracted sovereign debt crisis.

He argued the current rise of the euro meant to him first and foremost that investors' confidence in the bloc was picking up markedly, but added that it was unclear whether the development was sustainable.

The euro hit a 15-month peak of $1.3711 on February 1, with French President Francois Hollande suggesting on Tuesday that the eurozone should develop an exchange rate policy to protect the currency from "irrational movements."

hg/pfd (AP, Reuters, dpa)