ECB keeps interest rate on hold
(CNN) -- The European Central Bank has left its key interest rate on hold, despite signs that borrowing costs may have to come down soon to spark consumer spending and kick-start the economy.
The ECB, which is responsible for monetary policy within the 12-nation euro zone, decided Thursday to leave its lending rate unchanged at 2.0 percent.
The rate has been at that level -- the lowest seen among Europe's euro members since 1948 -- for the past nine months.
The ECB decision came on the same day as monetary policymakers received an upbeat reading of manufacturing in the euro zone.
This was countered by news Thursday that while French consumer confidence is returning, it is still not strong enough to help the country's weak economic recovery.
Overall euro zone recovery also remains weak.
Business and consumer sentiment stagnated last month, European Commission data showed this week.
Germany's influential Ifo business survey of 7,000 firms fell for the second consecutive month in March. Three consecutive monthly declines usually indicates an end to a recovery trend.
Still, some analysts believe the economic outlook is not bleak enough to prompt a rate cut.
"The economic data are not sending an acute alarm signal and therefore there is no acute need for ECB action," Claudia Heneke, economist at Dresdner Bank in Frankfurt, told Reuters.
Meanwhile, the Bank of England, which holds its monthly policy meeting on April 8, is also expected to keep its borrowing costs on hold -- as it did in March.
The BoE's key rate has stood at 4.0 percent since February, when central bankers raised it by a quarter point.
It also hiked the rate by a quarter point in November from 3.5 percent -- the lowest level since 1954, when Winston Churchill was prime minister.
The bank began pushing up rates after the UK economy shook off the impact of a global downturn.
The BoE is continuing to monitor the effects of strong economic growth -- and the added stimulus of a hot property market -- for signs of inflation pressure, which could prompt another rate rise in an effort to cool consumer borrowing.
 BoE is concerned that consumer spending may fuel inflation. |  |
There is also concern that the recent strengthening of the pound -- which increases buying power overseas but hampers the economy by making UK exports more expensive -- could be accelerated by higher interest rates, which makes sterling-denominated investments more attractive.
"The continued strength of the economy and of the housing market suggest that a rate rise is possible, but there are also uncertainties about the strength of the international economy ... and exchange rate movements that suggest waiting,'' John Hawksworth at PwC in London told Reuters.
"It is a close call but, on balance, we would expect the bank to wait for their next inflation forecast in May before acting.''
Added Philip Shaw at Investec in London: "The bank will continue their strategy of cautious increases in rates, firstly to monitor the behavior and the response of the consumer to rate increases and also to prevent sterling from rising much further.''
In the United States -- where the economy remains fairly robust -- the Federal Reserve's main lending rate currently stands at 1.0 percent, while the Bank of Japan has pushed borrowing costs to zero percent in an attempt to spark a long-awaited recovery.
