ECB, Bank of England Hold Interest Rates Steady

The European Central Bank and the Bank of England said Thursday they will keep their benchmark interest rates on hold.

ECB President Mario Draghi said the bank will keep its rate at one percent, while Mervyn King, the head of the Bank of England, said the British central bank will maintain the record-low rate of 0.5 percent being paid on commercial bank reserves.

The Bank of England also said it plans on paying another £50 billion ($79 billion) to buy government bonds and other assets, increasing its balance sheet £325 billion ($515 billion).

Although the Bank of England said some business surveys signal economic growth for Britain, the main export markets have also slowed and concerns remain about the indebtedness and competitiveness of some euro-area countries.

The correspondingly weak outlook for near-term output growth means that a significant margin of economic slack is likely to persist, the Bank of England said in a statement, but also noted output growth in 2012 should be supported by a gentle recovery in household real incomes as inflation falls, together with the continued stimulus from monetary policy.

Inflation was 4.2 percent in Britain in 2011, but inflation is expected to decline significantly in the country as an increase in the value added tax and a spike in energy prices will be factored in the calculations.

The ECB's interest rate decision underscores the heavy focus turned to Greece. Greek political leaders agreed Thursday to support harsh austerity measures to receive €130 billion ($172 billion) from the International Monetary Fund, the European Union and the ECB. The deal is expected to cut government pensions, slash the minimum wage and levy new taxes.

The deal must receive approval from the Greek parliament.

Greek unions planned protests on Friday against the deal.

The painful measures that create misery for the youth, the unemployed and pensioners do not leave us much room, secretary general of the ADEDY union, Ilias Iliopoulos, told Reuters. We won't accept them. There will be a social uprising.