FRANKFURT — The European Central Bank left its benchmark interest rate unchanged Thursday at 1 percent, as expected, as policymakers waited to see how a massive injection of cheap credit affects economic growth in the euro zone.
The Bank of England also kept its main interest rate unchanged, at 0.5 percent, amid concerns that the economic turmoil on the European continent and high oil prices will hurt the British economy.
Mario Draghi, the president of the European Central Bank, will hold a press conference at 2:30 p.m. in Frankfurt to discuss the decision. The meeting with reporters occurs on the same day as the deadline for Greece’s creditors to say whether they will take part in an agreement designed to lower the country’s overall debt.
Uncertainty about whether creditors would accept the offer has unsettled financial markets this week. Failure to win consent of enough creditors would upset plans to help Greece avoid a disorderly default on its debt, and raise tensions in the euro zone again. The deadline for creditors to accept the offer is 8 p.m. London time on Thursday.
Mr. Draghi will certainly be asked whether the E.C.B. plans further extraordinary measures to help Europe cope with the debt crisis. But he is unlikely to make any commitments yet.
The E.C.B.’s decision left the main interest rate equal to the record low. Most analysts expected the members of the E.C.B.’s governing council to leave rates on hold until there is more information about the direction of the European economy, and more data on the impact of more than €1 trillion, or $1.3 trillion, in cheap loans that the bank issued to euro area financial institutions last week and in December.
Banks could borrow as much as they wanted at the benchmark interest rate for three years, provided they could supply collateral. The flood of cash, known as a long-term refinancing operation or L.T.R.O., has significantly eased fears of a banking crisis and lowered borrowing costs for countries like Italy and Spain.
But it remains uncertain whether the banks are lending the E.C.B. money on to customers and thus promoting economic growth. “The E.C.B. needs time to assess its affects on the real economy,” Jens Sondergaard, an analyst at Nomura, said in a note to clients earlier this week.
A few weeks ago, many analysts expected the E.C.B. to cut the main interest rate below 1 percent for the first time ever. But they revised their views after it appeared that the euroarea economy might be stabilizing following a drop in output at the end of 2011. The euro area economy shrank 0.3 percent in the last three months of the year, compared to the previous quarter.
Some analysts continue to expect the E.C.B. to cut rates in coming months.
“While the L.T.R.O. has brought huge relief, it will probably not be enough to get the euro zone growing again,” Marie Diron, an economist who advised the consulting firm Ernst & Young, said in a statement Wednesday ahead of the E.C.B. decision. “We think that lower interest rates may still be needed, should the economic environment deteriorate later this year.”
Britain’s central bank, in addition to maintaining rates at a record low, also kept its bond purchasing program at £325 billion, or $510 billion, after increasing the stimulus plan by £50 billion last month.
“The high oil price is a concern and a messy Greek default could still be extremely damaging,” Simon Hayes, a senior economist at Barclays Capital, said. “Unless those risks disappear there will always be a little bit of nervousness in the U.K.”
Consumer price inflation has slowed recently, alleviating some pressure on households but it remains above the Bank of England’s 2 percent target. An increase in crude oil prices this year has driven up energy costs; benchmark crude prices are over $100 a barrel, and some economists said prices could climb further this year.
In Britain, economists expect the Bank of England to refrain from adding to its current asset purchasing program for at least another two months. Britain’s economy ground to a halt as companies were reluctant to invest in light of economic uncertainty, consumers hold back spending because of concern about unemployment and bank lending continues to be tepid.
The John Lewis Partnership, which owns Britain’s largest department-store chain, said Wednesday that annual profit fell 3.8 percent and that it cut its staff bonuses for the first time in three years. House prices fell in February and retail sales declined even as many stores tried to lure customers with discounts.
The government is seeking to fuel economic growth by increasing lending by banks to businesses. British banks had missed an earlier lending target set by the government.
Britons are waiting for the government to give an update on its finances and any possible tax increases on March 21, when George Osborne, the chancellor of the Exchequer, is to present the annual budget to Parliament. But analysts have said that Mr. Osborne has little room for maneuver if he wants to stick to his debt reduction plan.
Julia Werdigier reported from London.
The New York Times
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