European Central Bank head Jean-Claude Trichet warned there are increasing risks for the eurozone's waning economic recovery and less chance of inflation _ clear signals the bank is done raising interest rates for some time.
At a news conference Thursday, Trichet offered new, gloomier economic projections after the bank's 23-member governing council left the benchmark refinancing rate unchanged at 1.5 percent.
Pressure had risen on the bank to freeze its rate hike campaign after a turbulent summer in which worries grew that the 17-nation currency bloc's debt crisis was hurting consumers and businesses and global growth was stalling.
Trichet said the eurozone economy was expected "to grow moderately" but that that assessment was "subject to particularly high uncertainty and intensified downside risk."
Meanwhile, the risk of excessive inflation, which he had previously described as leaning to the upside, was now "broadly balanced."
Trichet turned aside questions about whether rates will stay on hold, saying "we are never pre-committed," but economists say the darker outlook is a sign the bank will not raise rates soon.
It controversially raised rates a quarter point in April and July, based on earlier expectations for more inflation and stronger growth.
Shadows over Europe's recovery have gathered quickly since the bank last made a rate decision on Aug. 4. Indicators of business and consumer optimism have sagged and second quarter growth came in at just 0.2 percent. The debt crisis has led to dizzying ups and downs on stock and bond markets, weighing on consumption and production.
The uncertainty also pushed Britain's Bank of England to leave rates unchanged on Thursday, at a record low of 0.5 percent, although in Britain's case inflation remains stubbornly high at 4.4 percent.
Eurozone officials are trying to contain a crisis triggered by market concerns that governments cannot handle their high debt loads. Those fears have raised borrowing rates for financially troubled countries, to the point where Greece, Ireland and Portugal have needed bailouts from other eurozone countries and the International Monetary Fund.
With prospects for the economy worsening, some experts even think the ECB may have to cut rates if Europe's debt crisis takes a turn for the worse. Economists at the Royal Bank of Scotland see a 40 percent chance that the bank will have to slash rates by a half percent by the end of this year.
Commerzbank economist Michael Schubert noted Trichet had called current rates "accommodative," or still low enough to support growth.
That "means that the ECB must see a further significant deterioration of the situation before it starts to consider rate cuts," Schubert said in a research note.
The ECB staff cut its growth projection for next year to 1.3 percent from 1.7 percent. It still sees inflation falling to 1.7 percent; last month eurozone prices grew 2.5 percent on an annual basis.
Trichet's usually smooth demeanor grew more animated when he was asked about widespread criticism in Germany of eurozone rescue efforts and the opinion held by some there that it would be better to abandon the euro and return to the deutsche mark.
Trichet, due to retire at the end of October, gave a seven-minute-long defense of the ECB's record since the euro's 1999 introduction, in which he said the bank had preserved the value of the currency and kept inflation in Germany low at an average 1.55 percent.
He noted that was better than Germany had done for 50 years with the mark, and underlined that the ECB had done so by maintaining its independence and ignoring French and German politicians who at times pressed it for lower interest rates _ which stimulate growth but can undermine a currency's value.
"To those people, I will say the following, we were called to deliver price stability," said Trichet. "We have delivered price stability over the first 12 years and 13 years of the euro _ impeccably, impeccably."
"I would very much like to hear the congratulations for an institution which has delivered price stability in Germany," he said, raising his voice for "in Germany."
"Thank you for your excellent question, which was very stimulating," he said with a smile at the end of his monologue, drawing laughter.
Trichet and the bank have played a key role in warding off the debt crisis, buying Italian and Spanish bonds to drive down bond market borrowing rates and prevent those countries from finding themselves unable to borrow affordably, as did Ireland, Greece and Portugal. Italy's fate is of concern because it's too big for the eurozone's euro440 billion ($618 billion) rescue fund to bail out.
Trichet had restrained praise for the spending cuts and tax increases passed by the Italian Senate on Wednesday night, saying the package was "in line with the first commitment" made by Premier Silvio Berlusconi to move more quickly to balance the budget.
He wouldn't comment on the bond buying program. However, Trichet and his incoming successor, Bank of Italy head Mario Draghi, have indicated they expect the purchases to be taken over by the eurozone rescue fund as soon as national parliaments approve giving it that power this fall.
In Greece, the government is in the process of carrying out a debt swap that should modestly cut its huge debt load, and is struggling to meet conditions for another installment of its bailout loan.
Financial market prices indicate there are widespread expectations among investors the country may default, an event that could mean serious losses for banks that hold the government bonds. That, in turn, risks undermining the economy by choking off credit to businesses.