ECB keeps rates unchanged, injects new money

The European Central Bank (ECB) left its key borrowing rate unchanged after injecting billions of more euros into the banking system to ease the credit crunch, which has seen short term bank rates shoot way above the ECB’s refinancing rate of 4 percent.

The euro dipped against the dollar after European Central Bank President Jean-Claude Trichet said recent market volatility has increased uncertainty.The euro fell to $1.3651 after Trichet’s remarks.

The collapse of the U.S. subprime-mortgage market has made banks reluctant to lend, pushing up the cost of credit and causing turmoil on world financial markets. The ECB earlier added 42.2 billion euros in emergency cash to ease the overnight deposit rate for euros as it climbed to 4.68 percent, the highest in six years. After the injection, the overnight deposit rate fell to 4.10 percent.

Central banks have added more than $400 billion to money markets since Aug. 9 to ease lending between banks.