Frankfurt, April 11 (Bloomberg) -- The European Central Bank kept its benchmarkinterest rate at 4.75 percent, snubbing calls from companies and politicians for lowerborrowing costs to stop slowing U.S. and Japanese economies curbing growth. ``I hear, but I do not listen,'' ECB President Wim Duisenberg said. There are ``noindications of the risk of a global recession,'' he told reporters. The euro fell to its lowest in more than a week. The ECB is the only major centralbank not to reduce borrowing costs this year. The U.S. Federal Reserve began tolower rates in January, followed by the Bank of England and the Bank of Japan. The ECB hasn't budged because inflation has exceeded the bank's 2 percent targetfor nine months even as economic growth is expected to slow to 2.7 percent from 3.4percent last year. Unlike the Fed -- which also has a mandate to boost employment-- the ECB's chief goal is to fight inflation. The slowdown in global growth is taking its toll on Europe. German, French andItalian business confidence is at its lowest in about a year and a half. Germanunemployment rose for a third month in March, while French factories made fewergoods for the first time in four months in January. The 12 nations that share the euro will probably expand 2.7 percent this year, from3.4 percent last year, according to the Organization for Economic Cooperation andDevelopment. ``We're seeing slower growth in Europe, but it's still not affecting prices,'' said NuriaOrtiz, economist at Banco Popular Espanol SA. ``Considering that, they couldn't cutrates.''
Bonds Plunge
European bonds plunged. The yield on German two-year notes, among the securitiesmost sensitive to interest rates, rose 17 basis points to 4.32 percent. That's thebiggest one-day gain since the ECB raised borrowing costs half a point on June 8. The euro dropped to 88.10 U.S. cents. Before the central bank's announcement, thecurrency traded at 88.95 cents. Lower borrowing costs would reduce the price of a mortgage or a loan for purchaseslike a car or furniture for the more than 300 million consumers in the region thatstretches from Lisbon to Helsinki. It would also make it cheaper for companies toborrow money to build factories, buy equipment and hire workers. ``It's important that the bank acts with timeliness,'' Franco Santagata, chief ofoperations at the Italian unit of Deutsche Post AG, said in an interview. ``If it acts lateand makes me suffer, then it's not doing its job.''
If Wim Called
A cut may also spur stock markets across Europe, which have declined on concernsabout slowing growth. The Dow Jones Europe Stoxx 50 Index has shed about 8percent this year. Shares account for 5 percent of household wealth in the euro area,according to Exane, a Paris-based brokerage. ``If Wim Duisenberg called me tomorrow, I would say `Please bring down interestrates.' It's the right signal for the economy and for customers to get them to invest,''said Ruediger Kapitza, chief executive of Gildemeister AG, a German machine toolmaker. At the same time, price rises have exceeded the bank's ceiling for nine months. InFebruary, the annual inflation rate rose to 2.6 percent from 2.4 percent the previousmonth. ``Risks to price stability have diminished over the past few months,'' Duisenberg said.``They have not disappeared.'' The last time the ECB cut rates was in April 1999. The bank then raised borrowingcosts seven times through October last year to prevent a decline in the euro and arise in oil prices from spurring an increase in the rate of inflation. Reducing interest rates ``depends not only on the likelihood of inflation falling under 2percent, but also to what extent it falls under 2 percent,'' said Duisenberg.
Political Pressure
Belgian Finance Minister Didier Reynders, current head of the council of euro-zonefinance ministers, yesterday urged the ECB to put aside concerns about prices andfocus on stoking growth. Germany's economics and finance ministers have said thesame thing. ``It would have looked very bad to talk about a wait-and-see stance until very recentlyand then to suddenly cut,'' said Ulrich Beckmann, an economist at Deutsche BankGlobal Markets Research in Frankfurt. ``They probably also didn't want to give theimpression they were caving in to pressure from outside.'' Germany's six main state-backed think-tanks yesterday called for the ECB to reducerates by half a point this quarter and lowered their forecast for growth in Europe'slargest economy. The BDI industry federation, which represents more than 80,000 companies with 11million workers, also called for a half- point reduction. Siemens AG said yesterday itwill shed 2,000 jobs, citing slowing growth.
`Need a Big Step'
``We need a big step to underpin growth,'' Max Abitbol, head of ABB Ltd.'s Frenchunit, said in an interview. ``We haven't felt a slowdown in Europe yet. We need apreventative cut.'' German truckmaker MAN AG, electronic circuit-board maker Austria Technologie &Systemtechnik AG and Germany's No. 1 fashion company, Hugo Boss AG, have allsaid they see lower earnings ahead as a slackening world economy damps demand. The last time the ECB cut rates was on April 8, 1999. The central bank lowered therefinancing rate by a half point to 2.5 percent, a low, to spur flagging growth at a timewhen the euro- area's inflation rate stood at a low of 0.8 percent in February of thatyear. The ECB raised borrowing costs seven times between then and Oct. 5, 2000.