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| E.C.B. Leaves Key Interest Rate Unchanged | E.C.B. Leaves Key Interest Rate Unchanged |
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| FRANKFURT — The European Central Bank on Thursday left its benchmark interest rate unchanged, a decision overshadowed by anticipation about plans to begin purchasing private-sector assets this month as a way to revive bank lending and pump money into the eurozone economy. | FRANKFURT — The European Central Bank on Thursday left its benchmark interest rate unchanged, a decision overshadowed by anticipation about plans to begin purchasing private-sector assets this month as a way to revive bank lending and pump money into the eurozone economy. |
| The decision to keep the benchmark interest rate at 0.05 percent was a foregone conclusion because the rate is already effectively as low as it can go. Instead, analysts and investors were waiting to hear more details about the central bank’s plans to buy packages of bank loans known as asset-backed securities. The central bank has not specified the quantity in which it intends to buy those securities. | The decision to keep the benchmark interest rate at 0.05 percent was a foregone conclusion because the rate is already effectively as low as it can go. Instead, analysts and investors were waiting to hear more details about the central bank’s plans to buy packages of bank loans known as asset-backed securities. The central bank has not specified the quantity in which it intends to buy those securities. |
| Analysts polled by Reuters expected the E.C.B. to aim to purchase 200 billion euros, or about $252 billion, in asset-backed securities as well covered bonds, which are another kind of security based on bundles of bank loans. | |
| In a news conference after the meeting of the central bank’s Governing Council in Naples, Italy, Mario Draghi, the president of the E.C.B., declined to say how big the asset purchases would be. | |
| The size will depend on the effectiveness of other central bank stimulus measures, he said. In addition, he said, the European Central Bank would not accept securities deemed overly complex. He said that more details on the program would be released later on Thursday. | |
| While significant, asset purchases of €200 billion would be far short of the €1 trillion that the central bank would like to inject into the eurozone economy through various measures aimed at spurring economic growth and averting deflation. Many economists fear that the eurozone economy is in danger of officially tipping into deflation, a condition in which falling prices prompt consumers to delay purchases, undercutting sales by businesses and leading to increased unemployment. | |
| Because the supply of private-sector assets that meet E.C.B. quality standards is limited, many analysts expect the central bank to eventually resort to purchases of government bonds, emulating the so-called quantitative easing used by the Federal Reserve in the United States. | Because the supply of private-sector assets that meet E.C.B. quality standards is limited, many analysts expect the central bank to eventually resort to purchases of government bonds, emulating the so-called quantitative easing used by the Federal Reserve in the United States. |
| Such action would inevitably provoke an outcry in Germany, and most analysts do not expect the central bank to begin buying government bonds until next year, if ever. In Germany, there is widespread fear that the central bank’s buying bonds would amount to a transfer of wealth from better-off countries to poorer ones. Many Germans believe they would have to pick up the tab if some countries defaulted on bonds owned by the central bank. | Such action would inevitably provoke an outcry in Germany, and most analysts do not expect the central bank to begin buying government bonds until next year, if ever. In Germany, there is widespread fear that the central bank’s buying bonds would amount to a transfer of wealth from better-off countries to poorer ones. Many Germans believe they would have to pick up the tab if some countries defaulted on bonds owned by the central bank. |
| Stocks in Europe, which were trading lower in advance of the central bank’s rate decision, recovered in the afternoon and were essentially flat. | |
| Recent economic data have added pressure on the central bank to act. The annual rate of inflation in the eurozone is at a five-year low, having fallen to 0.3 percent in September, official data indicated this week. That’s far from the central bank’s target of slightly less than 2 percent, which was last reached nearly two years ago. | Recent economic data have added pressure on the central bank to act. The annual rate of inflation in the eurozone is at a five-year low, having fallen to 0.3 percent in September, official data indicated this week. That’s far from the central bank’s target of slightly less than 2 percent, which was last reached nearly two years ago. |
| In addition, unemployment in the eurozone remained at 11.5 percent. | In addition, unemployment in the eurozone remained at 11.5 percent. |
| The central bank may take some comfort in the decline of the value of the euro, which is near a two-year low against the dollar. A weak euro makes imported goods more expensive for residents of the eurozone and contributes to higher inflation. | The central bank may take some comfort in the decline of the value of the euro, which is near a two-year low against the dollar. A weak euro makes imported goods more expensive for residents of the eurozone and contributes to higher inflation. |
| Slumping energy prices were one reason for the decline in inflation in September, from 0.4 percent in August. But there was also a decline in the so-called core inflation rate, which excludes prices for food and energy because they tend to fluctuate more. | Slumping energy prices were one reason for the decline in inflation in September, from 0.4 percent in August. But there was also a decline in the so-called core inflation rate, which excludes prices for food and energy because they tend to fluctuate more. |
| The decline in that rate is potentially more worrying for the central bank because it is a more direct reflection of slack demand and the poor health of the eurozone economy. | The decline in that rate is potentially more worrying for the central bank because it is a more direct reflection of slack demand and the poor health of the eurozone economy. |
| Recent surveys show that business managers have become more pessimistic, further increasing concern that the eurozone economy is suffering from the crisis in Ukraine and related sanctions against Russia. | Recent surveys show that business managers have become more pessimistic, further increasing concern that the eurozone economy is suffering from the crisis in Ukraine and related sanctions against Russia. |
| Last month, the European Central Bank offered four-year loans to commercial banks in the eurozone that were nearly interest-free, in an effort to make more credit available to businesses and households. But demand from banks for the loans was less than expected, and many economists believe the central bank will need to overcome its reluctance to buy government bonds in order to restore growth. | Last month, the European Central Bank offered four-year loans to commercial banks in the eurozone that were nearly interest-free, in an effort to make more credit available to businesses and households. But demand from banks for the loans was less than expected, and many economists believe the central bank will need to overcome its reluctance to buy government bonds in order to restore growth. |