European bank leaves interest rate alone

FRANKFURT, Germany, Sept. 7 (UPI) -- The European Central Bank, admitting the U.S. mortgage market turmoil could have a lingering effect in Europe, has reduced its growth forecast.

Citing “the level of uncertainty,” the bank left its benchmark interest rate unchanged a 4 percent, shifting course from a month ago when it signaled a quarter-point increase would be made.

Separately, the Bank of England kept its benchmark rate at 5.75 percent.

"The level of uncertainty has augmented in a very significant fashion," the central bank's President Jean-Claude Trichet said at a Frankfurt news conference. He said there had been a loss of confidence "in a large array" of markets, the International Herald Tribune reported.

The bank reduced its growth projection modestly -- to 2.5 percent, compared with a previous forecast of 2.6 percent. And it left its forecast of 2.3 percent for next year unchanged.

"We will not go back to the easy lending conditions that existed before," said Thomas Mayer, chief European economist at Deutsche Bank. "What we are witnessing is the bursting of a credit bubble."