European Central Bank predicts economic recovery

FRANKFURT - The European Central Bank (ECB) predicted Thursday a bigger pickup in the euro zone economy next year than expected, but left interest rates unchanged at the current record low.

ECB economists expect the euro zone to score gross domestic product growth next year of 0.8 percent, a big jump from the forecast of only 0.2 percent which they issued three months ago.

But the decision to hold interest rates where they have been since May made clear that the recovery was still fragile.

ECB President Jean-Claude Trichet said the current year’s gross-domestic-product contraction in the 16 euro zone nations was likely to be just 4.0 percent, rather than the bigger fall of 4.1 percent previously expected.

He said the zone was profiting from an inventory cycle, a recovery in exports and powerful macro-economic stimulus.

The bank’s governing council kept with its most favourable interest rate, covering main refinancing operations at banks, at an historic low of 1 percent.