European Central Bank keeps key rate at 1.0 per cent to help Greece

The European Central Bank (ECB) retained its main interest rate at a record low of 1.0 per cent, according to a spokesman, but financial markets were focused on worsening prospects for Greece.

ECB president Jean-Claude Trichet is expected to detail a new policy on collateral, which could be of vital importance to Greece and its banks, at a press briefing.

The policy will offer investors a clear picture of how much Greece's sovereign debt would be worth and could go towards providing some relief from the turmoil that could spread to other weak eurozone members such as Portugal and Spain.

The ECB's abrupt reversal of an announcement to the effect that it would not continue to maintain lower collateral has raised questions whether the central bank had been forced to withdraw from its position.
 
According to analysts, this seems to be the case and the bank may have been pressured to ensure that Greece was not deprived of its funding.

It is crucial for Greece that its banking industry would be able to continue to access ECB funds against Greek government bond collateral even with the country's lowered credit rating.

The Bank of England has, meanwhile, announced it would continue to maintain interest rate at a record low of 0.50 per cent, at its last monetary policy meeting before the 6th May general elections.