ECB's Trichet expected to strike upbeat tone at monthly news conference By William L. Watts, MarketWatch LONDON (MarketWatch) -- The European Central Bank and the Bank of England both left monetary policy unchanged Thursday, with key lending rates remaining at record lows. The European Central Bank said its key refinancing rate would remain at 1%. Earlier, the Bank of England said its Monetary Policy Committee voted to leave the lending rate at 0.5%. The MPC also left its 200 billion-pound ($318 billion) bond-purchase program, the centerpiece of its money-creating, quantitative easing program, on hold. The decisions were widely expected. Attention now turns to ECB President Jean-Claude Trichet's monthly news conference in Frankfurt at 8:30 a.m. Eastern. And minutes of the BOE meeting, which will be released later this month, will be watched to see how the debate over inflation risks developed. Trichet is expected to offer an upbeat assessment of the market reaction to last month's European bank stress tests. While criticized for a perceived lack of rigor, the results have been credited with increasing transparency and further easing worries surrounding sovereign-debt problems in the euro zone. Trichet may offer a somewhat more upbeat assessment on growth, but isn't expected to signal that official rates will be tightened any time soon, economists said. "While growth in [the euro area] is surprising somewhat to the upside and credit creation has picked up a bit, inflation remains very low," said Anton Mose, economist at Credit Suisse. The euro (EURUSD 1.3175, +0.0023, +0.1749%) traded at $1.3206, up 0.4% on the day, but little changed from the level seen before the ECB announcement. The British pound (GBPUSD 1.5872, -0.0013, -0.0818%) traded at $1.5904 versus the dollar, up 0.1% on the day. The Bank of England's June and July meetings saw MPC member Andrew Sentance as the lone dissenter in 7-1 decisions to leave policy unchanged. Minutes showed Sentance instead called for quarter-point rate hikes, questioning expectations that spare capacity in the economy will eventually bring inflation below the BOE's 2% target. Inflation remains above 3% on an annual basis. Since the July meeting, government data showed British gross domestic product grew by a much stronger-than-expected 1.1% in the second quarter. In testimony last week before a parliamentary committee, Sentance argued the data bolstered the case for a rate hike. But other MPC members, including Governor Mervyn King, warned against reading too much into a single quarter's data, noting that strong headwinds threatened to trim growth in the second half. "The debate is about the appropriate degree of stimulus, not about applying the brakes," King told the committee. Upcoming government fiscal austerity measures will drag on GDP, while significant job losses in the public sector will largely offset gains in private-sector employment, said James Knightley, economist at ING Bank. With growth likely to remain subdued at about 1% to 2% over the next three years, inflation pressures will remain under wraps, making it unlikely the central bank will move to tighten policy before the middle of next year, Knightley said. An unexpected drop in the July purchasing managers index for Britain's dominant services sector Wednesday underscored concerns about the second-half economic outlook, economists said. The decline, which marked a further slowing in the pace of services growth from its February peak, was attributed in part to concerns about the impact of the government's planned fiscal austerity measures. Read about U.K. services PMI.

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