European Central Bank Leaves Its Key Refinancing Rate Unchanged at 2 Percent

The European Central Bank left its key refinancing rate unchanged Thursday at 2 percent, waiting for solid evidence that Europe's economic recovery will gather strength. The decision by the Frankfurt-based bank's 18-member governing council meeting by teleconference due to the summer vacation season was widely expected by economists. The ECB has left the rate untouched since a half-point cut in June 2003. Economists expect the bank to keep rates steady for another few months and then to start raising it to ward off inflation, which can be a side effect of growth. Recent statements by bank officials only reinforced ECB President Jean-Claude Trichet's remarks after July's interest-rate meeting, when he stressed that the bank has "no bias" toward a rate move either way but remains vigilant about economic indicators for future inflation and growth. The 12 countries that use the euro are emerging from slow 0.8 percent growth in 2003, with growth of 1.3 percent in the first quarter over the year-ago period. But the pickup has lagged behind more robust expansions in the United States, Japan, and China. Higher oil prices which increase the cost of gasoline and industrial raw materials have helped raise the inflation rate in the euro zone to an annual rate of 2.4 percent in July, according to the early estimate by the European Union statistical agency.