The European Central Bank’s governing council left its key refinancing interest rate unchanged at 2 percent Thursday.
ECB President Jean-Claude Trichet gave little indication there would be a rate change in the near future, saying that it was maintaining “vigilance” in watching economic indicators. The decision to keep the same rate since June 2003 was widely expected.
“So far we have seen no significant evidence of underlying domestic inflationary pressures building up in the euro area,” he said.
Should the bank see major risks to price stability, however, he said “they all know that if needed we would immediately raise rates.”
Economists had said beforehand that the economy in the 12 countries that use the euro currency isn’t sending clear signals about whether the current moderate recovery is continuing, meaning the bank was likely to wait for more signs of solid growth before raising rates. Higher rates are the bank’s main tool in combatting inflation, which can be a side effect of growth.
All 43 economists in a survey by Dow Jones Newswires had expected the central bank to leave rates alone, but respondents were split on whether the ECB would lift rates by the end of the third quarter.
At its meeting on March 3, the bank’s 18-member governing council cited poor fourth-quarter growth data and declining business confidence in the euro zone as grounds for it to keep rates unchanged for now.
Bank economists cut their projections for growth for 2005 to a range of 1.2 percent to 2 percent from 1.4 percent to 2.4 percent for 2005 and for 2006 to 1.6 percent to 2.6 percent from 1.8 percent to 2.8 percent.
Many analysts think a rate increase is off the table for the next several months, following the EU Commission’s decision to trim its 2005 growth forecast to 1.6 percent from 2 percent and recent increases in oil prices. Oil prices have gone as high as $58 a barrel in intraday trading.