Europe holds interest rates steady

FRANKFURT — The European Central Bank left its benchmark interest rate unchanged at a record low Thursday, a decision that had been expected after recent economic indicators showed the eurozone economy was beginning to recover, albeit weakly.

The ECB left its main interest rate at 0.5 percent, where it has been since May. Official data, confirmed Wednesday, showed that the eurozone has emerged from a recession that began in mid-2011, taking pressure off the central bank to stimulate the economy.

However, bank lending, which is usually considered a precondition for economic growth, continues to decline. And countries including Spain, Italy, and Greece still suffer from declining economic output. Mario Draghi, the president of the ECB, has said that official rates will remain low for an extended period, which means that any increase probably is a long way off.


At a news conference Thursday, Draghi repeated that the central bank expects to keep its key rates “at present or lower levels” for an extended period, citing only “tentative signs” of economic improvement and a return of confidence.

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European stocks headed higher, and yields on eurozone government bonds edged down, as Draghi spoke, as investors took his words as a sign of a low-interest-rate market.

According to official EU data, the eurozone grew at an annualized rate of 1.2 percent in the second quarter of 2013, marking the end of a recession that began in mid-2011.

But the economic recovery has been mostly confined to Germany and a few other countries such as Finland and Austria. Unemployment has leveled off in the eurozone as a whole, as well as in some of the most troubled nations such as Spain, where there was a small dip in jobless people in August.

It is unclear how much or how quickly German growth will spill over to weaker countries, since firms in Europe’s largest economy have shifted much of their attention to the United States and China.