The lack of any action illustrated the gulf between those at the central bank who expect a recovery, even if weak, by the euro zone economy — which has been shrinking for a year and a half — and economists and central bankers elsewhere who fear that the euro zone is sinking ever deeper into stagnation.
Mario Draghi, the president of the E.C.B., said at a news conference Thursday that the bank’s Governing Council, meeting earlier in the day, had an “ample discussion” about measures to stimulate the economy. Those, he said, included even taking the unprecedented step of imposing a de facto penalty on commercial banks that hoard cash rather than lend it.
But amid uncertainty about what recent economic indicators are saying about future growth, “we see no reason to act at this point,” Mr. Draghi said at a news conference.
“The Governing Council agreed there was not any directional change that would justify taking action at this time,” he said, even as the E.C.B.’s own economists changed their economic forecast to a gloomier reading for the rest of the year.
The downward revision projected that the euro zone’s economy would shrink by 0.6 percent this year, worse than the 0.5 percent decline previously forecast. But the central bank expects growth in the euro zone of 1.1 percent next year, slightly higher than previous forecasts.
The E.C.B. left its main interest rate at 0.5 percent, a record low. Most analysts did not expect the bank to cut the rate only a month after reducing it from 0.75 percent.
In recent months, Mr. Draghi has floated some unconventional ways of steering credit to countries like Italy and Spain, where even healthy companies have trouble getting bank loans. For example, he has raised the possibility that the E.C.B. would work with the publicly owned European Investment Bank to make it easier for banks to package and sell bundles of small-business loans.
The E.C.B. had even said it was considering obliging banks to pay to store their money at the central bank, rather than earn interest on it — resulting in a so-called negative deposit rate. The goal would be to force banks to put their money to work by lending it. Mr. Draghi indicated that the central bank’s Governing Council had considered that move Thursday but decided not to proceed with it.
Economists who have been pressing the central bank to take more aggressive action to stimulate the economy were disappointed.
“The E.C.B. had increased expectations that it would be able to present a new quick fix for the real economy” by increasing lending to small and midsize businesses, Carsten Brzeski, an economist at ING Bank, said in a note to clients. “Today’s press conference shows that the ECB has returned into its garage, carefully studying what is left there.”
During his news conference, Mr. Draghi cited “downside risks surrounding the economic outlook for the euro area.” Those, he said, include the possibility of weaker-than-expected domestic and global demand and slow or insufficient policy changes in euro zone countries.
After Mr. Draghi’s comments, the value of the euro strengthened against the American dollar, settling at $1.3253. European stock markets closed down about 1 percent.
Mr. Draghi made it clear that he did not belong to those who believed the euro zone was heading down the same path as Japan, which has struggled for two decades to achieve sustained growth. Mr. Draghi told reporters that he saw no danger of deflation — a broad decline in prices that can throttle business investment and has afflicted Japan.
Price declines in some countries were the result of lower prices for oil and food, he said, not the “explosive dynamics downward” that would meet his definition of deflation.
“We don’t see anything like that in any country,” Mr. Draghi said.
Some recent economic indicators have kept alive the hope that the euro zone is close to hitting bottom. Surveys have shown that businesses and consumers are a little less pessimistic than they were. And inflation has accelerated slightly, although it is still below the E.C.B. target of about 2 percent.
Many economists point out that signs of a recovery are very weak and have urged the E.C.B. to be bolder. Unemployment remains a persistent problem, with joblessness in the euro zone at a record high of 12.2 percent. France reported on Thursday a 10.8 percent unemployment rate for the first quarter, also a record high.
Marie Diron, an economist who advises the consulting firm Ernst Young, expressed disappointment that the central bank had not done more to ensure that record-low interest rates were reaching businesses and consumers in troubled euro countries, where market rates remained punishingly high. She wrote in an e-mail, “The E.C.B. needs to intervene to ensure that its very accommodative monetary policy reaches the real economy.”
Article source: http://www.nytimes.com/2013/06/07/business/global/ecb-keeps-interest-rates-unchanged-in-hopes-for-recovery.html?partner=rss&emc=rss
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