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| Euro Zone Interest Rate Remains Unchanged | Euro Zone Interest Rate Remains Unchanged |
| (35 minutes later) | |
| FRANKFURT — The European Central Bank left its main interest rate unchanged Thursday, as expected, amid an atmosphere of relative calm in the euro zone that some analysts say could be deceptive. | FRANKFURT — The European Central Bank left its main interest rate unchanged Thursday, as expected, amid an atmosphere of relative calm in the euro zone that some analysts say could be deceptive. |
| Meeting a few days after the first anniversary of Mario Draghi as E.C.B. president, the governing council left its benchmark interest rate at 0.75 percent, an all-time low. | Meeting a few days after the first anniversary of Mario Draghi as E.C.B. president, the governing council left its benchmark interest rate at 0.75 percent, an all-time low. |
| The British central bank, the Bank of England, also kept its benchmark rate at 0.5 percent, a record low, and left its bond purchasing stimulus program at £375 billion, or $600 billion, after the British economy emerged from a double-dip recession in the third quarter. | |
| Britain’s economy grew 1 percent in the third quarter, its strongest quarterly growth since the global financial crisis started in 2008. But growth was helped by Olympic ticket sales, and some economists said the outlook for the economy remained gloomy. | |
| “The big picture is that it's going nowhere, really,” Vicky Redwood, economist at Capital Economics, said. “Output is essentially stagnating. It’s a pretty dismal picture." | |
| Mr. Draghi can claim much of the credit for holding the euro zone together since he assumed its most powerful financial post on Nov. 1, 2011. Under his watch the E.C.B. has made generous loans to euro zone banks and pledged to hold down borrowing costs for troubled euro zone countries. Mr. Draghi has vowed to do “whatever it takes” to preserve the common currency. | |
| So far, Mr. Draghi’s promise to intervene in bond markets has been enough to keep borrowing costs under control for Spain and Italy. The E.C.B. has not had to spend any money. Nor has Spain had to ask for a bailout from other euro zone countries. | So far, Mr. Draghi’s promise to intervene in bond markets has been enough to keep borrowing costs under control for Spain and Italy. The E.C.B. has not had to spend any money. Nor has Spain had to ask for a bailout from other euro zone countries. |
| But some analysts warn that the calm could prove temporary because the underlying causes of the crisis remain: too much debt and poorly performing national economies. | But some analysts warn that the calm could prove temporary because the underlying causes of the crisis remain: too much debt and poorly performing national economies. |
| “The E.C.B. has been very active since Mr. Draghi has been president, and this has been a major factor contributing to stabilize financial markets and thereby avoid much worse outcomes for the euro zone,” Marie Diron, an economist who advises the consulting firm Ernst & Young, said in a note. | “The E.C.B. has been very active since Mr. Draghi has been president, and this has been a major factor contributing to stabilize financial markets and thereby avoid much worse outcomes for the euro zone,” Marie Diron, an economist who advises the consulting firm Ernst & Young, said in a note. |
| “But the E.C.B. is not the sole actor and cannot save the euro on its own,” Ms. Diron said. “Ultimately the sustainability of the euro zone is down to structural changes at the country and European levels that are beyond the E.C.B.’s remit.” | “But the E.C.B. is not the sole actor and cannot save the euro on its own,” Ms. Diron said. “Ultimately the sustainability of the euro zone is down to structural changes at the country and European levels that are beyond the E.C.B.’s remit.” |
| A rate cut Thursday would have been a surprise. Mr. Draghi has complained on numerous occasions that lower official interest rates are not helping the countries that need credit most. Market interest rates remain high for businesses and consumers in troubled countries. | A rate cut Thursday would have been a surprise. Mr. Draghi has complained on numerous occasions that lower official interest rates are not helping the countries that need credit most. Market interest rates remain high for businesses and consumers in troubled countries. |
| Banks in the euro zone can borrow unlimited funds from the E.C.B. at the benchmark rate, provided they post collateral. But banks are not obligated to pass that rate on to their customers and might not do so in countries like Spain where banks are already struggling with large numbers of bad loans. | Banks in the euro zone can borrow unlimited funds from the E.C.B. at the benchmark rate, provided they post collateral. But banks are not obligated to pass that rate on to their customers and might not do so in countries like Spain where banks are already struggling with large numbers of bad loans. |
| Meanwhile, interest rates may be too low for countries like Germany, helping to fuel a rise in real estate prices, Dirk Schumacher, an economist at Goldman Sachs in Frankfurt, said. | Meanwhile, interest rates may be too low for countries like Germany, helping to fuel a rise in real estate prices, Dirk Schumacher, an economist at Goldman Sachs in Frankfurt, said. |
| “Cutting rates in the current environment of segmented markets is likely to boost growth in those places where it is needed least,” he wrote in a note to clients before the rate decision. | “Cutting rates in the current environment of segmented markets is likely to boost growth in those places where it is needed least,” he wrote in a note to clients before the rate decision. |
| The E.C.B. has already taken unprecedented steps to reduce market tension, and its policy options are dwindling. The central bank is likely to hold off on further rate cuts until members of the governing council feel the need is more urgent. | The E.C.B. has already taken unprecedented steps to reduce market tension, and its policy options are dwindling. The central bank is likely to hold off on further rate cuts until members of the governing council feel the need is more urgent. |
| In Britain, recent economic figures show that pressure on households is easing as unemployment and inflation start to fall. But the improvements have not been enough to translate into a marked improvement of consumer confidence. Debenhams and Marks & Spencer are among British retailers that recently gave cautious outlooks for their earnings. | |
| Prime Minister David Cameron, whose government is pushing ahead with an austerity program that includes welfare cuts and higher taxes, said last month that the economy was healing. But Mervyn King, the governor of the Bank of England, said two days later that it was difficult to know whether some of the recent positive signs would persist and that the recovery was slow and uncertain. | |
| On Wednesday, the European Commission cut its forecast for Britain’s gross domestic product to a 0.9 percent rise in 2013 from the 1.7 percent increase it predicted in May, partly because of risks from the euro zone. Even though growth remains weak, Britain is doing better than the euro zone. Germany, considered the growth engine of Europe, reported growth of only 0.3 percent in the second quarter. | |
| The manufacturing sector has also struggled, and output in September increased less than economists expected. House prices are unlikely to rise before 2014, according to the real estate firm Knight Frank. | |
| Julia Werdigier reported from London. Lark Turner contributed reporting from London. |