FRANKFURT — The European Central Bank left its main interest rate at a record low Thursday, apparently concluding that any further reduction would be powerless to ease a severe credit crunch in countries like Italy or Spain.
The E.C.B. left its benchmark rate at 0.75 percent. Some bank watchers had looked for a further reduction, in light of recent data showing that inflation is falling and many businesses continue to have trouble getting credit. A recovery of the European economy is unlikely until businesses are able to borrow again.
While cutting interest rates is a standard policy tool of central banks, Mario Draghi, the president of the E.C.B., has often complained that the central bank has lost much of its influence over rates in troubled countries like Spain. Comercial banks there are already struggling with problem loans and reluctant to lend except at much higher rates.
The E.C.B. governing council, which held its regularly monthly monetary policy meeting in Frankfurt, may have concluded that a rate cut now would be superfluous. The E.C.B. has been allowing banks to borrow as much as they want from the central bank at 0.75 percent, if they can provide collateral. But the E.C.B. cannot compel banks to pass on lower rates to customers, and many do not.
In addition, governing council members including Jens Weidmann, president of the German Bundesbank, may have argued that there is a danger of inflation in some countries if the benchmark rate is cut any further.
The annual rate of inflation in the euro zone is 2.2 percent and has been falling. The E.C.B. aims for a rate of 2 percent, and outside Germany — which is historically hypersensitive to inflation fears — few people are worried about rising prices.
Analysts had been divided on whether the E.C.B. would cut rates Thursday. The euro zone economy is shrinking, unemployment is rising, and E.C.B. figures released last week showed that credit issued to businesses continued to decline.
“In a normal world, a central bank confronted with these circumstances would look for ways to ease monetary conditions,” Carl Weinberg, chief economist of High Frequency Economics in Valhalla, New York, wrote in a note to clients.
But other economists expected the E.C.B. to wait because of signs that the euro zone economy could be poised for a mild recovery. Several indicators of business sentiment, such as the Ifo index in Germany, have shown that managers have become more optimistic and more willing to invest, because they are less afraid that the euro zone will break up.
“These indicators again came in better in December, with a particularly strong improvement in the Ifo Index, which argues for unchanged key rates in January,” Michael Schubert, an analyst at Commerzbank, wrote in a note.
European Central Bank Leaves Key Rate Unchanged
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European Central Bank Leaves Key Rate Unchanged
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European Central Bank Leaves Key Rate Unchanged
